Follow Us

Follow us on Twitter  Follow us on LinkedIn

11 March 2019

Financial Times: Low business investment set to persist, says BoE

Business investment in the UK risks staying low because of sustained uncertainty around Brexit, a member of the Bank of England’s interest rate setting committee said.

Jonathan Haskel, an external member of the Monetary Policy Committee, said capital spending by companies was unlikely to surge even if Theresa May’s withdrawal agreement was approved by parliament.

He said Brexit uncertainty was likely to continue to dampen business investment, given the variable length of any UK transition period with the EU in the agreement and the unknown shape of a future trade deal between the two sides.

Companies’ capital spending fell for four successive quarters last year, the longest period of decline outside of a recession since 2003.

Mr Haskel said that, whatever the final trade deal between the UK and the EU, business investment was likely to be lower with the BoE forecasting that every form of Brexit will lead to lower economic growth.

“The longer-term question is whether [business] investment will eventually bounce back after [Brexit] uncertainty is resolved . . . At least for the next few years the prospect of low investment seems possible,” he said in a speech at Birmingham university.

Mr Haskel noted how the political declaration agreed between the UK and the EU last November about the future relationship between the two sides contained only “the broadest words about wanting a close relationship”.

He said: “For business, the question of whether that is a customs union or free trade area is vital since that gives more of a steer as to whether there will be relatively frictionless trade with the EU or not.

“This has to be decided so that negotiators can get started and firms can, in turn, make investment plans.” [...]

Full article on Financial Times (subscription required)



© Financial Times

< Next Previous >
 Hover over the blue highlighted text to view the acronym meaning
Hover over these icons for more information

Add new comment