July 11, 2017 / 12:33 PM / a year ago

Bank of England's Broadbent: cut in UK trade with EU would hurt economy

LONDON, July 11 (Reuters) - A reduction in trade between Britain and the European Union would harm both economies and causes prices to rise, Bank of England Deputy Governor Ben Broadbent said on Tuesday, without addressing the outlook for interest rates.

In a speech that focused on the benefits of globalisation, Broadbent warned that less trade with the EU would damage Britain’s comparative advantage in exports of financial and business services.

At the same time, Britain would end up having to produce more of the things it currently imports from the EU and is less good at creating.

Broadbent’s comments come after businesses last week pressed Prime Minister Theresa May and her government to negotiate a smooth Brexit when Britain leaves the EU in just under two years’ time, saying an abrupt departure would deter trade and investment.

“All else equal, the first shift - i.e. away from services exports - would tend to lower UK income, the second to raise certain costs - that is, of food and machinery,” Broadbent said in a speech in Aberdeen to the Scottish Council for Development and Industry.

“Trade really is mutually beneficial and less of it costs us all,” Broadbent said.

Broadbent remains one of two members of the eight-strong Monetary Policy Committee yet to divulge his views on interest rates, along with newcomer Silvana Tenreyro. (Reporting by Andy Bruce, editing by David Milliken)

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