Bank of England warns Brexit complicates UK’s inflation control

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

Estimates suggest that UK GDP has been reduced by roughly 6% to 8% compared to a counterfactual scenario where Brexit never happened. For context, the entire UK economy is worth roughly $3.1 trillion, so shaving 6% to 8% off that figure represents hundreds of billions in lost output.

Business investment in the UK has underperformed relative to other G7 economies since the referendum in 2016, as companies grappled with regulatory uncertainty and new trade barriers.

Pill, who has served as the BoE’s Chief Economist since 2021, addressed these themes in an October 2025 speech where he placed Brexit alongside other institutional changes reshaping UK monetary policy. His framing was notable for its candor: Brexit wasn’t presented as a one-time shock that the economy would absorb and move past, but as a permanent structural shift that the central bank needs to account for in its models and decisions indefinitely.

What this means for investors

For crypto markets specifically, this particular dynamic appears largely disconnected. The BoE’s work on a potential central bank digital currency, sometimes called the digital pound, operates on a separate track from its Brexit and inflation analysis. No references to digital assets have appeared in the Brexit-inflation discourse, suggesting that crypto remains outside the BoE’s framework for addressing these structural challenges.

Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.