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EU referendum uncertainty not harming UK economy, Bank says

The Bank of England has not seen any signs that UK companies are scaling back their investment plans because of uncertainty caused by the looming EU referendum, a top Bank official said.

Deputy governor Ben Broadbent was asked how the referendum on Britain’s membership of the European Union, likely to be held in June, was affecting the economy.

He told BBC radio 5 Live: “We have not yet seen, regarding investment intentions, any weakening of those of late, but obviously it’s something we watch pretty closely.”

US investment bank Goldman Sachs warned on Thursday that sterling could fall 15-20% if Britain votes to leave the EU. Such an outcome would alarm foreign investors and put them off injecting capital into Britain, placing pressure on the current account deficit.

The pound slipped 0.4% against the dollar on Friday, falling to $1.4531.

Broadbent’s comments came as a YouGov poll conducted for the Times showed that the “out” campaign has achieved a record lead as the public rejected the terms of Prime Minister David Cameron’s draft reform deal with the EU. The survey found that 45% of voters now want to leave the EU against 36% who want to stay. Nineteen percent do not know or would not vote in the referendum.

JPMorgan Chase economist Allan Monks cautioned that the poll was conducted at a time when “media write-ups of the draft deal were scathing”. He went on to say: “Two major factors will be the extent to which fear of the unknown persuades the undecideds to remain, and issues surrounding migration will stoke support to leave. The latter is hard to predict and depends partly on how the refugee crisis is handled this year.

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“But backing to remain from leading politicians and businesses could help to make up the minds of those currently undecided. Either way, at this stage the risk of a vote to leave appears real. And regardless of the ultimate effect this would have on the UK, we believe the transitional costs would be high.”

Broadbent also said that the UK was enjoying a “solid” recovery but added there was “no great urgency” to put up interest rates.

He described the fall in oil prices as a “net good” for the economy. A global oil glut and weaker demand have pushed crude prices down by 75% since mid-214. Brent crude, the global benchmark, traded at $34.08 a barrel on Friday, down 1.1%.


Broadbent said real wages (adjusted for inflation) had risen 7% in the last two years – the fastest growth rate in nearly 15 years.

“A lot of that has to do with the drop in oil prices. That’s boosted consumption and UK growth overall,” he said.

“It was only in the latter part of 2012, once confidence about the eurozone had begun to come back, that the UK economy really got going. So, I would date the recovery not from 2008 or 2009, but actually from early 2013. And since then we’ve enjoyed three years of pretty solid growth, certainly in the labour market.”


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