Wages 2.6% lower due to Brexit, says Bank of England policy committee member

Real wages are 2.6% lower due to the impacts of the Brexit vote, a member of the Bank of England’s Monetary Policy Committee has said.

Dr Swati Dhingra, who is also a professor at the London School of Economics, said: “It’s undeniable now that we’re seeing a much bigger slowdown in trade in the UK compared to the rest of the world.”

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 – and I’m not talking simply through real wages, but also through nominal wages – we think that number is about 2.6% below the trend that real wages otherwise would have been on.”

She said this was followed by reduced business investment and trade numbers are now reacting to the impact of the Brexit deal that the UK signed with the EU.

Brexit damage

The Bank of England has not changed its forecast for how much damage that Brexit will do to UK gross domestic product, Governor Andrew Bailey has said.

Speaking to MPs on the Treasury Select Committee, Mr Bailey said the Bank had thought that the economy would be somewhat smaller due to the decision, taken in 2016.

“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%,” 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.”