— No Mention of Monetary Policy in Remarks to CityUK Conference
By Laurie Laird
LONDON (MaceNews) – The governor of the Bank of England has called for enhanced private investment to finance the UK’s economic recovery, lamenting low levels of business investment that pre-date the Covid slowdown.
“We live in a time where there appears to be no shortage of aggregate saving, but investment is weak,” said Andrew Bailey, giving the keynote speech to the the virtual CityUK National Conference on Tuesday. Investment “on a much larger scale than we have seen in recent years” is necessary “to ensure viable businesses survive and to finance the need for investment.”
Private outlays have been knocked by the twin traumas of Covid and the uncertainty of the UK’s future trading arrangements with the European Union, according to Bailey. The UK is due to exit its transition period with the EU at the end of December, but has yet to strike a deal with its biggest trading partner.
Business investment increased by 8.8% in the third quarter, recovering only a portion of the 26.5% crash between April and June. Investment has suffered greatly since the vote to leave the EU in June of 2016, declining in every quarter of 2018.
In his pitch to London’s financiers, Bailey expressed optimism that post-Covid structural changes in the UK economy are likely to be less wrenching the the disruptive shift from an industrial-dominated economy decades ago. “That was a much more painful process …I don’t believe that Covid will lead to the sort of inter-sectoral change that we saw in the 1980s and 90s,” adding that post-Covid adjustments could improve Britain’s chronically-low productivity growth.
The Bank of England governor steered clear of any discussion of monetary policy ahead of the Bank’s next rate-setting meeting on 17 December. But he did stress that the Bank’s current quantitative easing programme, which was expanded earlier this month, should raise confidence amongst private sector institutions. Asset purchase programmes provide “support of private finance, via a well-functioning financial system, for the economy and thus for consumption and investment.”
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Contact this reporter: laurie@macenews.com.
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