Brexit uncertainty increasing, says governor03/08/17Government
The governor of the Bank of England, Mark Carney, has warned that growing uncertainty over Brexit is already weighing on the economy.
Carney’s comments were delivered as the bank voted to hold rates and cut growth forecasts.
It edged this year’s growth forecast down to 1.7% from the previous forecast of 1.9%, made in May. Moreover, it also cut its forecast for 2018 from 1.7% to 1.6%.
Carney said: “It’s evident in our discussions across the country with businesses … that uncertainties about the eventual relationship are weighing on the decisions of some businesses.
“Investment has been weaker than we otherwise would have expected in a very strong world … So the consequence of that is starting to build [whilst] the speed limit of the economy has slowed.”
The bank voted 6-2 to keep interest rates on hold at 0.25%. They have been at that level since August last year.
Carney said that the bank expects business investment to pick up from its current “very subdued” levels, but that it is still below historic rates.
He added that Brexit uncertainty was also affecting pay negotiations.
“There is an element of uncertainty which is affecting the wage bargaining. Some firms, potentially a material number of firms, are less willing to give bigger pay rises, given that it is not as clear what their market access is going to be over the course of the next few years”.
There has not been a rise in interest rates in the UK since July 2007.