U.S. Markets

Brexit could affect economy for longer than COVID: BoE's Saunders

FILE PHOTO: Euro and pound banknotes are seen in front of BREXIT letters in this picture illustration taken April 28, 2017. REUTERS/Dado Ruvic/Illustration

LONDON (Reuters) - Bank of England interest-rate setter Michael Saunders said the long-term effects of Brexit could have a bigger impact on companies than the coronavirus pandemic.

“Businesses will shake off the effect of COVID-19 as they’re temporary, but the long-term effects of Brexit could be more permanent,” Saunders said in an interview with website.

BoE Governor Andrew Bailey said on Monday that a no-deal Brexit would cause longer-term damage to Britain’s economy than the pandemic, and the impact of the change might be felt for decades.

Britain and the European Union are still negotiating a trade agreement ahead of the Dec. 31 expiry of a post-Brexit transition period.

Saunders also said Britain’s economy was unlikely to fall into a recession.

“It’s not worth getting too worried about recession at the moment. We had a big recovery in Q3 and there will be a dip in Q4 – but we’re only forecasting a contraction of around 2%,” he said.

Writing by William Schomberg; Editing by Alistair Smout