Bank of England chief economist Andy Haldane says they were wrong on Brexit, but UK must factor in financial services in negotiations
The Bank of England's top economist has said the financial services sector should be one of the top concerns for the government in the upcoming Brexit negotiations, while acknowledging that the Bank's predictions on the effects of a vote to leave the EU were badly wrong – a "Michael Fish moment".
Andy Haldane, chief economist of the Bank of England, said: “Having some awareness of what we do well as a country is going to be crucial" during negotiations, he said.
The health of the financial services sector is "very big earner for UK plc", he said in remarks at the Institute for Government think tank, which government should take into account during negotiations.
Read more: BoE's Haldane wants "muscular" easing to help economy post-Brexit vote
Haldane also confronted the failures of his profession in recent years, saying economists have fallen into a "methodological monoculture" – including on the effects of the Brexit vote.
The effect of Brexit on future forecasts is still "unknowable", but the economics profession is nevertheless "in some ways in crisis", he said.
The magnitude of the error could be put down to consumers, whose spending has held up in the last six months. However, Haldane also warned consumers could face a "somewhat more difficult year" as inflationary rises start to take hold.
Meanwhile, Haldane stuck to the Bank's “neutral stance" on monetary policy, saying that it was the “right way" to balance rising inflation with weaker growth.
He has previously said that the rise in UK inflation is “benign and helpful”. The Bank is mandated to boost inflation towards a two per cent target.
He also defended low interest rates, saying that one million more Britons would be unemployed without them.
Read more: It's unanimous: Bank of England keeps interest rates on hold
Prime Minister Theresa May has been the most prominent critic of low interest rates, saying that they harm savers – a key electoral demographic.
She said in her Conservative party conference speech that a “change has got to come".
However, the perceived implication of interference in the affairs of the independent Bank of England was itself criticised, with BoE governor Mark Carney defending the Bank’s freedom from government intervention.
Haldane also threw his weight behind government efforts to form an industrial strategy.
He said “I absolutely support” the principle of government intervention to boost UK business.