Chancellor Rachel Reeves blamed Brexit for the UK’s high inflation as she appeared at the Future Investment Initiative in Riyadh. The Chancellor said that inflation was too high in Britain and one of the reasons was “too much cost associated with trade”.
Inflation remained at 3.8% for the third month in a row in September, nearly double the Bank of England’s target. Ms Reeves said Britain’s inflation problem had been partially addressed with the fresh trade agreement made with the EU in May.
“There are obviously huge benefits from rebuilding some of those relations, but also inflation is too high,” she told the conference. “One of the reasons for that is that there’s too much cost associated with trade with our nearest neighbours and trading partners.”
She said that Brexit “was a rejection of open borders” and that the Government had been worried that “reopening that can of worms” of the relationship with the EU could be “quite dangerous”. However, she insisted the response to rebuilding trade ties with the EU “has been very good”.
Separately, Chris Bryant, the trade minister, said Brexit has been “bad for trade” with the European Union as he attended an event at the headquarters of the World Trade Organisation (WTO) in Geneva.
Elevated levels of inflation increase the cost of servicing Britain’s £2.9 trillion of national debt, with interest payments on large portions of the borrowing tied to inflation. The Chancellor has faced criticism for appearing at the event after Labour criticised the Conservatives for doing business with the “murderous” regime.
She is leading a UK delegation to the Gulf in search of economic growth, with less than a month to go before her autumn Budget. She spoke amid reports that the downgrades by the Office for Budget Responsibility (OBR) will deliver a £21bn blow to the public finances.
The budget watchdog is expected to cut its forecast for productivity growth by about 0.3 percentage points, according to the Financial Times. The Institute for Fiscal Studies (IFS) has warned that every 0.1 percentage point hit to productivity will deliver a £7bn blow to Britain’s public balance sheet.
