Andrew Bailey yesterday warned the outlook for the British economy is among the worst he has ever seen.
In a gloomy assessment, the governor of the Bank of England said the UK’s growth prospects were weaker than they have been for much of his working life.
But the 64-year-old, who joined the central bank in 1985, insisted it was ‘too soon’ to even discuss cutting interest rates because getting inflation back under control remains ‘hard work’.
Downing Street hit back, however, with the Prime Minister’s official spokesman declaring ‘we have turned a corner’.
Global business leaders were also upbeat with the bosses of US giants JP Morgan and Blackstone singing Britain’s praises at a major investment summit.
Open for business: Prime Minister Rishi Sunak (pictured) hit back at The Bank of England Governor’s gloomy claims with his official spokesman declaring ‘we have turned a corner’
Appearing at the same gathering at Hampton Court Palace, Business Secretary Kemi Badenoch told delegates – including those from China and the Middle East – to ‘ignore the doom-laden nonsense you may hear’ about the UK.
She highlighted a £2billion investment by Japanese car giant Nissan in Sunderland announced last week, adding: ‘Let’s not forget that people said Nissan would leave the UK because of Brexit.
‘As we saw on Friday, they could not have been more wrong.’
But Bailey – who along with colleagues at the Bank is battling to get inflation back to the 2 per cent target having seen it spiral to a 40-year high of 11.1 per cent last year – struck a more negative tone on a trip to the North East.
Speaking to the Newcastle Chronicle, he said: ‘It does concern me that the supply side of the economy has slowed.
‘It does concern me a lot. If you look at what I call the potential growth rates of the economy, there’s no doubt it’s lower than it has been in much of my working life.’
Bailey acknowledged that higher interest rates are ‘restricting the economy’ but warned they will remain elevated for the ‘foreseeable future’.
‘We do have to get [inflation] down to 2 per cent and that’s why I have pushed back of late against assumptions that we’re talking about cutting interest rates or we will be cutting interest in anything like the foreseeable future because it’s too soon to have that discussion,’ he said.
The Bank has raised rates from a record low of 0.1 per cent to a 15-year high of 5.25 per cent since December 2021 in a battle to bring inflation under control.
And while inflation has fallen from 11.1 per cent last year to 4.6 per cent now, it remains more than double the 2 per cent target.
Rishi Sunak and Jeremy Hunt are battling to turbo-charge the economy, and the Chancellor used last week’s Autumn Statement to cut taxes and incentivise business investment in bid to boost long-term growth rates.
The Prime Minister yesterday hailed ‘very positive momentum behind the UK economy’ as he welcomed global figures to the investment summit.
And in a vote of confidence, JP Morgan boss Jamie Dimon said the UK was ‘doing great’ and added that he would ‘take notes’ to show the White House.
Fellow Wall Street heavyweight Steve Schwarzman, the boss of investment giant Blackstone, hailed the UK’s ‘real achievement’ in halving inflation and steering away from the subsidy-heavy approach of President Biden’s administration.
Schwarzman also praised Britain’s stability, despite the criticism about changes in government creating uncertainty over recent years.
He said: ‘People like us need consistency. We need to be able to trust what’s going to happen without huge lurches.
‘The UK is quite good about that and so it’s pretty much a pro-business place – it varies a little bit with different administrations but fundamentally pro-business and reliable.’News Related