Member Article

Bank of England boss tells Humber more rebalance is needed to sustain recovery

Confidence in the UK economy is growing, but some rebalancing is required to sustain the developing recovery, a meeting of Hull & Humber Chamber of Commerce’s North East Lincolnshire Area Council heard.

Will Holman, the Bank of England’s deputy agent, told the meeting in Grimsby that when Mario Draghi, the head of the European Central Bank, declared he would do “whatever it takes” to keep the Eurozone intact, his statement reassured the markets which are now less worried about a bad “event” happening, such as a country deciding to leave the Euro.

This has had a positive effect on UK banks and we are now seeing a lower cost of borrowing with lending now turning a corner and banks being more willing to lend to households and companies which in turn is supporting the recovering economy, as indicated by the Chamber’s recent Quarterly Economic Surveys.

However, as the UK’s economy shows positive signs of recovery, Mr Holman said “Boom Time” headlines in the Press are somewhat exaggerated and the Bank is more cautions than those headlines would suggest. Although the UK is now seeing consistent growth, the Bank is cautious because of where that growth is coming from.

Mr Holman explained that households are spending again on goods and services and new house building is on the up again, but we have yet to see much in the way of business investment and exports are still down on previous levels.

Jobs growth has been very strong in recent months and the squeeze on households’ discretionary incomes has started to ease after it took a real hammering in 2011, but has now started to turn positive in the last two quarters.

Savings rates have also been falling, with around 8% of households saving during the recession, but in the last year or so this has dropped to 5%, so people are spending more on cars and holidays, but this does not make for a sustainable recovery.

Mr Holman said we need to see a “handover” of growth to companies and businesses and the Bank is now starting to see firms beginning to expand, which it hopes will translate into growth in exports as the Euro Zone starts to recover which is also expected to happen this year.

The Governor of the Bank of England, Mark Carney, has said he believes the recovery in the UK is starting to take off, but there is no need to increase bank rates yet. When they do start to rise, maybe in a year’s time, Mr Holman said they are expected to go up in small increments and any increases are predicted to be limited.

Mr Holman said the Bank will continue with is supportive monetary policy.

This was posted in Bdaily's Members' News section by Clare Burnett .