Andrew Bailey warns investment delays hitting UK growth
Bank of England Governor Andrew Bailey has warned firms are delaying investment plans due to global turmoil, damaging the UK’s economic growth prospects.
Markets have restabilised since April when President Trump’s sweeping tariffs threatened to damage international trade while oil prices have fallen since a short-lived conflict between Iran and Israel.
But Bailey has warned that UK businesses did not feel they were out of the woods yet as they remained hesitant about the potential impacts global shocks could have on their businesses.
In an interview with CNBC, Bailey suggested caution on the part of businesses was holding the UK economy back from growing further.
“That increase in uncertainty and unpredictability is definitely coming through in terms of activity and growth,” he said.
“When I go around the country talking to businesses, which I do a lot, what they tell me is that they are putting off investment decisions.”
The Governor also pointed to a “weakening” in the labour market though he remained coy when asked whether interest rates would be cut in August.
“I think that the path of interest rates will continue to be gradually downwards,” he said.
“I haven’t changed my mind on that. But in terms of, you know, you always ask about the next meeting – where are we going to go in the next meeting? Well, we’ll see.”
Interest rates were held at 4.25 per cent at the last meeting in June, with the Bank of England lagging behind the European Central Bank (ECB) in its pace of cuts over the last year, whose benchmark rate now stands at two per cent.
Bailey reiterated that the Monetary Policy Committee (MPC)’s focus was on getting inflation down to its two per cent target as he deflected criticism that the Bank had stifled UK growth.
“Well, there will be no sustained growth unless we have stable, low inflation. That’s a sort of almost written on the heart of all central banks.
“I’m not trying to, in any sense, crush growth.”
Andrew Bailey’s growth concerns
Andrew Bailey’s comments on investment come as the Office for National Statistics (ONS) revealed UK business investment increased by 3.9 per cent in the first three months of the year, a downgrade from a previous 5.9 per cent estimate.
The UK has suffered from a lack of business investment since the pandemic, with new figures likely to come as a relief to Chancellor Rachel Reeves despite Bailey’s remarks.
Businesses bought more ICT equipment and other machinery, the ONS said, which is part of a wider drive to boost technology.
The UK’s whole economy investment, which also includes public sector investment data, increased by two per cent in the first quarter.
John Phillipou, chair of the Finance & Leasing Association, said the figures provided a “sign of cautious optimism” among UK firms.
But the lack of investment in larger infrastructure suggested firms were putting off decisions due to global turmoil in the first three months of the year.
“The decline in investment in areas such as buildings suggests some firms remain hesitant to commit to longer-term investments amid ongoing economic uncertainty.
Separate analysis by Barclays showed that high-growth UK businesses took up £165bn in bank loans and overdrafts in the year to March 2025, with all regions seeing an increase in the number of new businesses in the first quarter of the year.