Dr Swati Dhingra also said British workers had taken a 2 per cent real terms cut in their wages due to the UK’s departure from the EU, as members of the bank’s Monetary Policy Committee (MPC) appeared before parliament’s treasury committee.
Living standards are under immense pressure around the globe this year due to record inflation, particularly in food and energy prices, but Dr Dhingra said Britain would suffer more as a direct result of having left the EU.
“It’s undeniable now that we’re seeing a much bigger slowdown in trade in the UK compared to the rest of the world,” Dr Dhingra, who is also an associate professor at the London School of Economics (LSE), told MPS.
She said that British households had seen their food shopping expenses rise 6 per cent higher than other countries in recent years, referencing research by LSE students that examined the impact of the UK’s poorer trading terms since Brexit.
She added: “The simple way of thinking about what Brexit has done to the economy is that in the period after the referendum, there was the biggest depreciation that any of the world’s four major economies have seen overnight.
“That contributed to increasing prices and reduced wages ... we think that number is about 2.6 per cent below the trend that real wages otherwise would have been on.”
She said that was followed by reduced business investment and trade numbers were now reacting to the impact of the Brexit deal that the UK signed with the EU.
Bank of England Governor Andrew Bailey said Britain’s economy was recovering far worse from the shock of the Covid-19 pandemic than that of the eurozone and the US.
Despite this, he said, Brexit’s impacts so far had not been surprising and stuck by the bank’s longstanding estimate that UK productivity would see a long-term fall of around 3 per cent.
“This [estimate] was done pretty soon after the referendum, it essentially assumes that there is a long-run downshift in the level of productivity, a little over 3 per cent,” he said.
“As a public official, I’m neutral on Brexit per se, but I’m not neutral in saying that these are what we think are the most likely economic effects of it.”
The bank chief’s appearance before the Treasury Committee comes days after a former MPC member said Brexit had “permanently damaged” the UK economy.
“It’s reduced the economy’s potential output significantly, eroded business investment,” economist Michael Saunders said, adding: “If we hadn’t had Brexit, we probably wouldn’t be talking about an austerity budget this week.”