Andrew Bailey

Mr Bailey said that he was relatively optimistic about the economy’s ability to recover from the coronavirus pandemic, but he warned that it would be more difficult to adjust to the post-COVID economy without a Brexit deal.

He told the Treasury select committee that the long-term effects would be larger than the long-term effects of COVID. He said: “It takes a much longer period of time for what I call the real side of the economy to adjust to the change in openness and adjust to the change in the profile of trade.”

Speaking as negotiations between London and Brussels entered what could be their final week, Mr Bailey added: “It is in the best interest of both sides, the UK and the EU, for there to be a trade deal.”

Mr Bailey added that he was more optimistic about the effects of the pandemic, which the BoE estimates will cause the economy to shrink by 11% this year, The Times reports.

It is expecting a rebound of 7% in 2021, but other forecasters are more pessimistic. The International Monetary Fund is forecasting UK growth of 5.7% next year.

However, the roll-out of a vaccine by Spring next year could boost the economy substantially. Andy Haldane, the bank’s chief economist, said that the latest developments in vaccine development were better than the bank had been expecting.

He said: “I’d say, on balance, that news has been to the positive side of our assumptions in November.” He added that people had been too pessimistic about the long-term effects of the pandemic.”