Bank of England deputy governor Ben Broadbent has said policymakers had been too pessimistic about the immediate aftermath of the Brexit vote, but warned of an “insidious” threat to business investment.
“There’s little doubt that the economy has performed better than surveys suggested immediately after the referendum and … somewhat more strongly than our near-term forecasts as well,” Broadbent said in a speech at the Wall Street Journal’s offices in London.
“The central projection in the August inflation report didn’t involve a recession, simply a slowing in the economy’s rate of growth. But that slowing looks so far to have been more moderate than we feared.”
But the deputy governor cautioned against reading too much into individual pieces of data following the UK’s decision to leave the EU.
He said that while consumer spending would be “relatively unperturbed”, the greater risk would be a hit to business investment, as companies hold off on big spending commitments because of heightened uncertainty.
“A lack of clarity about the UK’s future trading relationships needn’t result in visible, headline-grabbing closures of productive capacity. The effect is likely to be more insidious: decisions to expand, that might otherwise have been taken, are delayed.”
