MNI POLICY: BOE's Haskel: No Big Brexit Deal Investment Bounce

By David Robinson

     LONDON (MNI) - Even if the UK government's agreement for withdrawal from

the EU is approved by parliament Brexit uncertainty could linger for years to

come, depressing investment, Monetary Policy Committee member Jonathan Haskel

said in a speech Monday.

     Following are key points from his inaugural speech as an MPC member, in

which he suggested that there may be no big "Brexit dividend" if parliament

agrees to the deal being pushed by Prime Minister Theresa May, delivered at the

University of Birmingham:

     --Haskel cited former top civil servant Ivan Rogers' aphorism that "Brexit

is a process." The EU Withdrawal Agreement, scheduled to be voted on in

parliament this week, sanctions a transitional period of 21 months to four years

under which current trade arrangements continue before the UK moves to

whichever, unspecified, trade deal is agreed. Haskel pointed out that business

would continue to operate under uncertainty over what the UK's future trading

arrangements throughout this period.

     --Haskel said that, with the length of the transition period and the future

trade deal unknown, business would face uncertainty when making investment

decisions over long-term trading arrangements.

     The long-term question is whether investment bounces back and part of the

answer to this is what the trade deal at the end of the process looks like.

     The MPC, in its forecasting process, assumes that the UK moves to an

average of possible Brexit end states, all of which are less advantageous for

trade than current arrangements, with growth lower than if there had been no

Brexit.

     "In standard growth models, a lower level of output means less capital

(since the capital/output ratio is a constant) and hence investment does not

bounce back fully since less capital is required," Haskel said.

     --"At least for the next few years the prospect of low investment seems

possible," he said.

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

[TOPICS: M$B$$$,M$E$$$,MT$$$$,M$$BE$]