Brexit has had a “chilling” effect on business investment in the UK, a deputy governor of the Bank of England has said.
Speaking to MPs on the Commons Treasury committee, Dave Ramsden, the Bank’s deputy governor for markets and banking, said the fallout from the 2016 referendum had stalled investment levels compared with other leading nations and contributed to a lower “speed limit” for the UK economy.
“It’s hard to conclude otherwise, that the decision to leave the EU – that may have had lots of goods reasons for it – but that it has chilled business investment,” he said.
Business investment is now only 6 per cent higher in real terms than in the second quarter of 2016, when the Brexit referendum was held, Ramsden added.
“That’s less than 1 per cent a year. Over that time, US business investment has gone up by over 25 per cent,” he said.
“You can see a break in the trend for UK business investment in 2016. It had been going up since the global financial crisis and then it flattened off from 2016 onwards.”
The Bank’s deputy governor said certainty was a key driver of business investment decisions, suggesting it had been lacking in recent years.
“Ideally you want low and stable inflation but also you want certainty around where fiscal policy is going, and certainty about what the kind of relationships your economy is going to have.”
He suggested weaker levels of investment had contributed to holding back the productive capacity of the UK economy. “We therefore think the speed limit the economy can grow at without triggering inflation is lower,” he said.