WATCH Mark Carney: Brexit behind lagging UK growth while rest of the world 'booming'
Mark Carney has said business investment in Britain is falling behind the rest of the world as a result of Brexit uncertainty.
The Bank of England governor said while growth across the world is “booming”, it is moving at a slower pace in the UK because of the process of leaving the EU.
“Since the referendum, what we’re seeing is that business investment has picked up, but it hasn’t picked up to any of the extent that one would have expected given how strong the world is, how easy financial conditions are, how high profitability is and how little spare capacity they have,” he told ITV’s Peston on Sunday.
“It should really be booming, but it’s just growing. I think we know why that’s the case, because they’re waiting to see the nature of the deal with the European Union.
“It’s the most important investment destination and [businesses] need to know transition and end state, everybody knows this, the government knows it and is working on it, UK businesses know it and the Europeans know it…”
He added that the further Britain moved from the European single market in its trade deal with the bloc, the harder the hit would be for UK businesses.
“In the short term, without question, if we have materially less access than we have now, this economy is going to need to reorient and during that period of time it will weigh on growth.”
“Without question, if we have less access than we have now, this economy is going to have to reorient and during that period of time it will weigh on growth.”
His intervention comes after the central bank raised interest rates for the first time since 2007 amid fears that Brexit will create more inflation pressure.
Mr Carney said it was possible that in the event of a bad Brexit deal, the Bank would not be able to cut interest rates in future because of that pressure, although insisted it was “not the most likely” scenario.
The governor added that while Brexit was "reinforcing" some of the effects of the 2008 financial crash, he predicted a more optimistic future.
"We actually think profitability is going to pick up over the next couple of years, but not by the same degree as the past, and it's that Brexit affect which is weighing on it," he said.
"This uncertainty is going to be resolved in the relatively near future.
"UK businesses are in very good shape, their balance sheets are in good shape, the financial system is in excellent shape.”