UK’s economy has rocky road ahead

London — Bank of England (BOE) policymakers painted a gloomy picture of the UK’s economic outlook, warning that the nation faces a long road back from the hit of the pandemic.

Governor Andrew Bailey told legislators on parliament’s treasury committee that the risks to growth remain to the downside, while one of his deputies, Dave Ramsden, said the economy might have lost more than 1.5% of growth permanently.

Fellow monetary policy committee member Gertjan Vlieghe said in written testimony that it could be years before there’s a full recovery, and before the BOE can hit its inflation goal of 2%.

The UK has been rocked by the coronavirus pandemic, with a 20% contraction in the second quarter that was the biggest among major developed nations. The BOE has unleashed a raft of stimulus measures, including slashing the benchmark rate to a record-low 0.1% and raising its asset purchase target to £745bn.

Policymakers delivered a slightly less downbeat assessment in August, saying that the hit was shallower than initially thought, and the consumer-driven rebound faster.

Still, the country faces the prospect of a renewed wave of infections, and a surge in unemployment when furloughs end. Bailey said the uncertainty in the BOE’s forecast was the largest to date.

Bloomberg