Nearly a decade after the Brexit referendum, the Bank of England is still tallying the bill. Chief Economist Huw Pill has identified Brexit as a key factor making it harder for the central bank to wrestle inflation back to its 2% target, pointing to lasting damage across supply chains, labor markets, and competitive dynamics.
The mechanics of the problem
Pill’s argument centers on three interlocking issues that Brexit introduced or worsened. First, supply chain disruptions. New trade barriers between the UK and its largest trading partner created friction where there was once frictionless movement of goods. Second, labor market flexibility took a hit. Free movement of workers between the UK and the EU ended, shrinking the pool of available labor in sectors that had relied heavily on European workers. Think hospitality, agriculture, logistics, and healthcare. When employers compete for fewer workers, wages rise. Rising wages aren’t inherently bad, but when they outpace productivity gains, they feed directly into inflation. Third, competitive pressures weakened. With fewer foreign firms operating seamlessly in the UK market, domestic businesses face less pressure to keep prices low.
The GDP question
