MNI: UK Potential Growth Weak, No Easy Fix - BOE's Bailey
MNI (LONDON) - There are no quick fixes to the UK’s problems with weak potential growth, Bank of England Governor Andrew Bailey said in his annual Mansion House speech on Thursday, 14 November 2024, though he backed the case for boosting investment and pressing ahead with infrastructure projects.
Bailey made no comment on monetary policy and instead highlighted how average annual UK potential growth had fallen from 2.6% from 1990-to-2008 to just 0.7% from 2020-23, largely due to weaker productivity growth. Higher business investment will be needed to supplement higher public expenditure, but it will take time to improve things, with the positive effects of artificial intelligence likely to diffuse slowly through the economy, he said. (See MNI INTERVIEW: UK Borrowing For Investment Risky - OBR's Miles)
"The ageing population does mean the tide is running against us on labour supply. It makes the productivity and investment issue all the more important," he said.
Bailey said official data probably understates the size of the economy, as it is bad at capturing investment in intangibles, but that this would be unlikely to lift the UK up international investment tables. The BOE is set to complete a new "supply side stock-take" in February, he said.