Bank of England chief economist says UK recovering ‘faster than anyone expected’

LONDON: Britain is recovering faster than anyone had expected from the economic impact of Covid-19, but businesses need better incentives and access to finance to invest in technology, Bank of England (BoE) chief economist Andy Haldane (pix) said.

“UK GDP had, by July, recovered around half of its Covid-related losses, rebounding further and faster than anyone expected,” Haldane said in an article for the Mail on Sunday newspaper written jointly with the former chairman of John Lewis Partnership, Charlie Mayfield.

Britain’s central bank said in a policy statement on Thursday the economy was recovering faster than it had forecast in August, though prior to that several policymakers had struck a more cautious tone than Haldane.

Haldane said he was writing in his capacity as chairman of a government commission to boost economic productivity.

The BoE on Thursday gave its strongest hint yet that negative interest rates could be on the way. Following a regular policy meeting, the BoE led by governor Andrew Bailey left its key interest rate at a record low of 0.1% amid low inflation and rising unemployment caused by Covid-19 fallout.

The central bank also maintained its cash stimulus, or quantitative easing supporting the economy, at £745 billion (RM3.98 trillion, the minutes of its latest meeting showed.

Markets expect the quantitative easing amount to increase before the end of the year.

“The path of growth and inflation will depend on the evolution of the pandemic and measures taken to protect public health, as well as the nature of, and transition to, the new trading arrangements between the European Union and the United Kingdom,” the minutes stated.

“It will also depend on the responses of households, businesses and financial markets to these developments.”

The BoE said it was exploring “how a negative Bank Rate could be implemented effectively, should the outlook for inflation and output warrant it”.

The central bank said it would begin “structured engagement on the operational considerations” in the fourth quarter.

A negative interest rate would likely see retail banks further cutting their own borrowing costs, adding more pain to savers while boosting borrowers.

– Reuters