Referendum clouding judgment on UK economy

THE EU referendum is casting “a fog” over the British outlook, a top Bank of England policymaker has warned, clouding the ability of interest rate setters to determine the extent of the recent economic slowdown.

Kristin Forbes, a member of the Bank’s monetary policy committee, said that uncertainty over the looming vote could only explain “some of the softening” in the British economy.

“There is a fog over the data,” she told the Belfast Telegraph. “Some of the data is quite solid, and some of the data has been a bit softer. We aren’t quite sure why.”

The policymaker said that some of the weakness “could be related to uncertainty around the referendum”.

However, she added that this would only “explain some of the softening”.

“We don’t have concrete evidence that some of the softening we are see- ing now is all referendum-related and uncertainty related, and there is a chance other things are going on.”

Her comments came as data showed that UK factory output climbed to a nine-month high in the quarter to May.

A rebound in the food and drink sector after heavy flooding earlier this year drove output volumes to their highest since August 2015, according to the Confederation of British Industry.

Its poll of just under 500 manufacturers showed factory bosses were also more optimistic about activity over the next three months, suggesting the sector is unfazed by next month’s EU vote.

The survey showed 36pc of businesses reported an increase in output volumes in the quarter to May, compared with 23pc that said volumes fell.

The resulting positive balance of 12pc was much higher than April’s reading of 1pc.