Brexit is "nowhere near" the most important factor in the future of the U.K.'s economic growth, according to Chatham House Chair Jim O'Neill.
The U.K. is set to leave the European Union officially at 11:00 p.m. London time on Friday, and the Bank of England on Thursday estimated trend GDP (gross domestic product) at an anemic 1.1% per year over the next three years, having believed several years ago that Britain's economy could sustainably grow at around 2.5% a year.
However, the former Goldman Sachs Asset Management (GSAM) chairman told CNBC's Joumanna Bercetche on Friday that Brexit had not necessarily led to a permanent supply shock to the British economy, and was a "convenient issue to cite" in justifying low productivity.
"As big as the Brexit issue is, and it's not a decision that I thought we should have taken but it is what it is, this is nowhere near the most important thing for the future of Britain's productivity and therefore its growth. In the decade or so since the crisis, our productivity is down an accumulative 20% to what it was before," O'Neill said.
The Bank of England opted to hold its base interest rate steady at 0.75%, with markets having been divided over whether a rate cut was imminent, a consideration O'Neill, who also previously served as commercial secretary to the Treasury under former Prime Minister David Cameron, suggested was unjustified given recent economic data which indicated a post-election bounce.
"It looks very likely that in the March budget, we are going to get a very expansionary fiscal policy, quite a lot of which is going to be geared around specific measures to help the north of England and the midlands in particular, areas which have the weakest productivity in the U.K. and have not only been at the core of the problem of the past decade but for decades before," O'Neill said.
He added that if the "shock to the establishment" of leaving the EU forces policymakers to address regional inequalities in skills, education and infrastructure, the U.K. "might end up being able to make something out of this mess that we've created for ourselves."
U.K. productivity growth is estimated to have averaged around 0.5% per year since the financial crisis and slowed in 2019, relative to around 2.25% beforehand, according to the BOE Monetary Policy Report, which has stymied supply growth.
The MPC anticipates that productivity growth will pick up slightly from current rates over the next three years, but will remain subdued, with a fall in Brexit-related uncertainty expected to reduce the drag on investment and productivity growth.