Andrew Bailey: Surveys point to weak UK economy
Andrew Bailey has backed the Bank of England’s low growth outlook, highlighting dreary business surveys which indicate the UK economy looks set to weaken.
In an appearance in front of the Treasury Select Committee, the Bank Governor said growth of 0.7 per cent in the first quarter of the year was a “good number” but warned MPs on the Treasury Select Committee not to get ahead of themselves.
“We have had more volatile short run GDP numbers of late,” Bailey said in response to a question made by Labour MP Lola McEvoy.
“The challenge we have at the moment is that the forward-looking sort of evidence on activity in the economy – so the surveys – are nothing like as strong as that.” The governor described a “disjoint” between official growth data and forward-looking expectations.
Data provided by the likes of the Confederation of British Industry (CBI) have shown growth expectations among businesses at their weakest level since the period around Liz Truss’ mini-budget and overall business confidence continuing to decline.
The lack of optimism has come as firms have faced higher employment taxes and rising energy costs, while some 200,000 job losses could yet still come from higher duties on inheritance.
UK economy in precarious state
Economists fear that the precarious state of the public finances will prompt the Chancellor to raise taxes in the autumn despite Keir Starmer’s claims that the UK could not “tax our way to growth”.
Bailey said that surveys provided by industry groups, as well as those conducted by the Bank itself via its agents placed around the country, provided Bank officials with insight on the direction of the UK economy.
“Surveys are probably…on average a better predictor of the future than the immediately previous GDP number, ” he said.
“All the various surveys get around quite a lot of the economy.”
Major forecasters such as the International Monetary Fund say UK growth will hit around one per cent this year.
The Paris-based think tank OECD said the UK economy would grow at a slower rate than it previously expected and urged Reeves to raise taxes in order for her fiscal buffer to be restored.
Deutsche Bank suggested that Reeves will have to make at least £10bn in tax hikes later this year.