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Investing.com -- Bank of England (BoE) governor Andrew Bailey has urged the U.K. government to reduce the negative impact of Brexit by pursuing closer ties with the European Union, particularly in financial services.
Speaking at a financial services dinner in Dublin, Bailey stressed the need to cut non-tariff barriers.
“There is merit in seeking to increase the openness of our financial markets by reducing non-tariff barriers,” he said. Bailey argued that easing regulatory friction would improve trade and help stimulate economic growth.
His remarks came shortly after Prime Minister Sir Keir Starmer unveiled a new “reset” agreement with Brussels, which aims to ease trade barriers in key sectors such as food and energy.
While Bailey welcomed the government’s push to rebuild trade links, he noted that Brexit had “weighed” on U.K. growth and productivity. “We should do all we can to minimise negative effects on trade,” he said.
Bailey’s comments align with those of Chancellor Rachel Reeves, who has previously argued that Britain should pursue a more cooperative trade relationship with the EU by aligning rules in “mature industries” such as chemicals.
The BoE governor and the chancellor made a joint call for stronger U.K.-EU ties in November, amid growing concerns about a potential transatlantic trade war following Donald Trump’s re-election.
Bailey also pointed to financial regulation as a priority area for renewed cooperation, highlighting money market funds as a possible next step, following recent reforms to improve the resilience of liability-driven investment (LDI) funds used by U.K. pension managers. Many of these funds are domiciled in Ireland or Luxembourg.
Bailey stopped short of saying Brexit was a mistake but was explicit about its costs, particularly the creation of new regulatory frictions. He also pushed back against the idea that the U.K. is the only party that stands to gain from closer financial ties.
“As with goods trade, open financial markets support economic growth as well as increasing investment and reducing the cost of capital,” he said.
He added that tighter cooperation with the EU is becoming even more important in the face of “increased market volatility” sparked by recent U.S. tariff proposals.