The economic damage done by Brexit is happening sooner than feared, the Bank of England warned.
The central bank said the UK economy is being hindered by a sharper slump in trade with the European Union than implied by official statistics and “very subdued” business investment.
A quicker Brexit blow was part of a dismal picture the BOE presented Thursday on the economy’s growth prospects over the coming years.
Analysis by Bank staff found that goods trade has been weaker than official figures have suggested once it is adjusted to account for data issues, such as delayed customs declarations.
Since the UK’s new trading relationship with the EU began in January 2021, official data shows a 7% fall in trade. But the BOE’s adjusted figure points to a 14% slump.
“We have not changed our estimate of the long-run effects but we have brought some of them forward,” said Ben Broadbent, deputy governor at the BOE. “We think probably they are coming in faster than we first expected, even if the long-run effect is no different.”
Brexit has “pulled down potential output in our country,” Broadbent added.
The BOE also sees little prospect of a turnaround in the subdued levels of business investment since Brexit, predicting declines of almost 6% both this year and next.