Innovation ‘encouraging’ across Yorkshire despite slow economic growth across the UK

One of the nine members of the Bank of England’s Monetary Policy Committee – responsible for setting country’s interest rate – has visited Yorkshire as part of his role to get a regional view on the “temperature of the economy.”

Dr Gertjan Vlieghe, who joined the Monetary Policy Committee of the Bank of England in 2015, was in Yorkshire to conduct one-to-one sessions with businesses across the region, as well as speak at business events. He also visited a school to talk about the economy and inspire the next generation.

The remit of the MPC is to ensure financial stability for the country, looking at inflation reports, economic forecasts as well as recent trends in the economy in order to determine the interest rate. During the summer, the Bank of England raised the country’s interest rate for only the second time in a decade – rising from 0.5% to 0.75%; the highest level since March 2009.

Speaking to TheBusinessDesk.com, Vlieghe said the MPC’s role was about keeping the economy steady, ensuring there was no shock from inflation and that the economy “reaches cruising speed” while always being as steady and balanced as possible. He added it was important that he and his MPC colleagues regularly visited regions to get a view of the “temperature of the economy.”

Economist Vlieghe said he was struck that Yorkshire businesses were continuing to innovate even when investment across the country had been held back during 2018. “Businesses are changing processes, they are scaling up and down. The fact they are adapting very quickly to technological innovation is encouraging,” he said.

Vlieghe spoke at an event in Bradford co-organised by West & North Yorkshire Chamber of Commerce and the University of Bradford

Vlieghe said it was clear to see that the labour market was “starting to get tight” across Yorkshire and beyond, putting pressure on wages and therefore further strain on businesses. He said Brexit was exacerbating macro-economics and that there was some worry about a further skills shortage post-Brexit.

This year, overall economic growth across the UK has been slow at just 1.5%. Business investment growth was slightly negative during the time frame, which Vlieghe described as a “big gap” between the UK and other G7 countries, where business investment growth has averaged more than 5% this year.

Vlieghe said his expectation was that 2019 would be better than 2018 on the assumption that a deal is successfully concluded, assuming that there is no cliff-edge. Of 2018, Vlieghe said: “There is evidence that people have put things on hold.

“We think that next year we should see some business investment postponement come back on track,” added Vlieghe.

“The message has been from larger businesses that their relationships with banks has normalised.” He added that this has led to investment kick-starting and that banks have repaired balance sheets since the financial crisis to be in a good position to lend again.

However, there has been an overall weakening in lending to small businesses, he added. Vlieghe said that the economic success across all sizes of businesses was extremely important for the future economic direction of the country.

Vlieghe added that 2018 had seen further funding choices enter into the marketplace, with more peer-to-peer lending platforms and alternative sources of finance now available, in turn offering more options to smaller businesses.

“It is important that there are new challenger banks coming in, doing different business in a different way,” he added.

Of his role on the MPC, Vlieghe, whose role is appointed directly by the Chancellor, said: “It’s fascinating and a real privilege. The Bank of England has this very long, illustrious history. It’s great to be part of that; a caretaker for a few years.”

Close