In coming years, Brexit is set to hold back productivity growth, Bank of England’s external policymaker Ian McCafferty said Tuesday.
McCafferty, who has been voting for a rate hike since March Monetary Policy Committee meeting, said uncertainty about the final terms of Brexit encouraged companies to put investment plans on hold. His term is set to end in August.
Once the final arrangements are agreed upon, the changing nature and destination of trade will require reallocation of both capital and labor, which in turn is set to curb productivity growth until the trading and production patters are in place, policymaker noted.
“So while I think that some of the factors that have weighed on productivity growth since the financial crisis are now dissipating, it seems to me that another set of factors is likely to hold back productivity growth in coming years – the transition to Brexit and, were they to materialise, less open trade and investment arrangements after Brexit,” he said.