The Bank of England governor Andrew Bailey hopes for a “spirit of goodwill” between Britain and the EU once the Brexit transition period expires at the end of the year.
Bailey sounded the alarm over diplomatic relations if the UK government and EU negotiators fail to strike a deal in time to maintain trade ties.
“I would hope that if there is a trade agreement there will be a spirit of goodwill around this, and that some of the inevitable changes of processes that will disrupt things in terms of adjustments are managed smoothly," he told a European Central Bank (ECB) conference on Thursday in comments reported by Reuters.
"I'd be more concerned if there isn't a trade deal because ... that spirit of goodwill might not be there, frankly.”
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But Bailey said Britain’s financial sector was “ready” for the end of the transition period, which has sustained smooth trade ties so far despite Britain’s departure from the bloc.
It comes as EU and UK negotiators continued to seek to break the deadlock in talks in London this week, with time in short supply if the EU is to ratify an agreement by the end of the transition. Mid-November is seen as the new deadline.
A Downing Street spokesperson told reporters on Thursday: “Talks are continuing in London and the negotiators are working hard to bridge the still significant gaps that remain.”
Britain is likely to see its access to European markets, institutions and other rights severely curtailed if no deal is struck, with fears of disruption to essential supplies and damaging tariffs on UK exporters from farmers to carmakers.
A senior car industry figure warned earlier this week that failure to strike a deal with no tariffs or quotas for UK car exports would be “devastating” for jobs, “slamming the brakes on the UK’s ambitions to be a world-leading manufacturer.”
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), said both sides had to deliver on promises to safeguard carmakers, warning no-deal would cost UK manufacturers up to £47bn ($62bn) in lost trade over the next five years.
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