Andrew Bailey is a walking market mover. Every time the Governor of the Bank of England opens his mouth, he knows it could impact the cost of UK government borrowing, or the price of sterling, or any number of things. Consequently, his public statements are rarely made off the cuff.
It was therefore intriguing that in his Mansion House speech to investors, Bailey (looking pretty svelte these days, if I may) chose to commit some news. He said that he took "no position on Brexit per se" before going to do exactly that, by encouraging the government to "rebuild relations" with the EU.
To be fair, that is a fairly banal comment. "Rebuilding relations" could mean anything from having tea with Ursula von der Leyen to joining the single market, euro and Schengen Area. Moreover, if the Bank of England Governor feels unable comment on the impact of government policy on trade and growth, who can? Still, the timing and nature of the intervention was notable.
Certainly, no one can seriously quibble with Bailey on the facts. The Office for Budget Responsibility (OBR) notes that Brexit (or rather, the Trade and Cooperation Agreement which came into effect on 1 January 2021) will reduce long-run productivity by 4 per cent relative to remaining in the EU. Meanwhile, Bailey is right to focus specifically on the trade of goods. UK exports are down by nearly a quarter compared with the pre-2020 trend, while imports are 16 per cent lower.
As for trade deals with non-EU countries, or Global Britain, the OBR forecasts these will have no material impact, because they either replicate agreements the UK already enjoyed as an EU member, or are simply too small. Donald Trump's proposed tariffs on the other hand have the potential to do some serious damage to UK exporters.
I won't get into what "rebuilding relations" might mean in practice. Remember, there is such a thing as the 'cakeism of remainers', in that there is only so much closer the UK can get to the EU without some real tradeoffs. For example, joining the customs union would mean no more non-EU trade deals, while rejoining the single market (but not the EU itself) would leave the UK as a rule taker. Both of these would be politically difficult to sell, and that is before one gets to the commitments Labour made in its election manifesto.
Still, Bailey has now dipped his toes in 'the discourse'. The Bank's remit is not to make political statements, but to maintain price and financial stability amongst other things. It would certainly be a retrograde step for the governor's views on Brexit to become some sort of litmus test for suitability for the role, like a US Supreme Court nominee.
Perhaps this is all pearl-clutching. Bailey's comments were fairly mild. But in the world of independent central bankers, that qualifies as a little bit spicy.
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