Britain's economy is experiencing “lasting changes” as a consequence of the Covid-19 pandemic and the country's financial services industry must make a "major commitment" to support investment, according to Bank of England Governor Andrew Bailey.
Mr Bailey said the financial services industry must support the economy, businesses and the people of this country as the UK gets back on its feet and tries to address climate change.
"If these changes persist, they could require a reallocation of labour and capital, and this reallocation could be more or less costly,” Mr Bailey said in a speech to TheCityUk, a financial services industry group.
“None of us have good answers yet to how much these changes will persist, or even increase. But my best guess is that there will be lasting changes.”
Britain’s economy bounced back from recession in the third quarter of the year with record growth of 15.5 per cent, which still left the economy 9.7 per cent smaller than it was before Covid-19 struck.
The UK's return to growth in the three months ended September 30 came as movement restrictions eased following the first lockdown. Analysts warn that the economy is likely to shrink again in the fourth quarter of the year because of the effects of a second shutdown.
Mr Bailey said economic theory shows that heightened uncertainty about the future tends to have a negative effect on investment and “increases the attraction of waiting to see how the uncertainty is resolved”.
“Both Covid and the process of setting the future relationship with the EU have increased uncertainty ... and this has restrained investment, “he said.
Business expectations for sales next year remain subdued along with measures of investment intentions, he said, however, “encouraging news on the vaccine front … will play a major role in lowering the level of uncertainty,” as it may cause a reversal of a period of low productivity growth.
Looking back over the past couple of decades, Mr Bailey said business investment since the global financial crisis of 2008-09 has been weaker than in previous expansions, and investment growth has been unusually weak relative to employment.
In turn, Mr Bailey said the excess supply of saving globally relative to investment opportunity means that neural interest rates “will stay low for the foreseeable future”.
While the central bank chief has said in the past that negative interest rates are not imminent, the BoE has been assessing whether UK financial institutions can implement sub-zero rates without damaging their business, or whether such a move would backfire by depressing consumer confidence.
Former Bank of England Governor Mervyn King warned earlier this week that people would pull their money out of their accounts to stash it at home if interest rates are cut below zero.
However, Mr Bailey said on Tuesday that the “prevailing lack of uncertainty means” there is no room for the central bank to be complacent.
“You should expect a central bank to remain cautious,” he said.
On the issue of economic scarring from Covid, Mr Bailey said the consequences of structural changes will be less severe post-pandemic than they were in the 1980s and 1990s, when the country transitioned from heavy industry and mining to a more services oriented economy.
“That was a much more painful process, with very difficult consequences, including a sharp increase in economic inequality. I don’t believe that Covid will lead to the sort of inter-sectoral change that we saw in the 1980s and 90s. It is more likely to be a case of intra-sectoral change, for instance within services,” he said.
This is because the UK now has a labour market that has the capacity to adjust relatively quickly to such changes, he said.
While aggregate saving in the UK has gone up this year in line with a lack of opportunity to spend during the movement restrictions, Mr Bailey said investment is weak and there is no certainty “this higher saving level will persist”.
With Covid causing a major shock to companies, UK companies could face a cash flow deficit in the current financial year of up to around £200 billion ($264bn), as well as having to potentially refinance around £275bn of debt maturing over the coming year, according to the BoE’s August Financial Stability Report.
Mr Bailey said that authorities would keep an eye on risks from higher debt levels.
"While the current low level of interest rates supports the sustainability of UK corporate debt, higher leverage would make the corporate sector more vulnerable to interest rate or earnings shocks," he said.
Going forward, he said there is still a role for further monetary policy. The BoE injected a further £150 billion ($195bn) of stimulus into the UK economy earlier this month as it warned a second wave of the coronavirus pandemic will lead to a slower, bumpier recovery.
“As well as maintaining interest rates which are consistent with achieving the inflation target, in my view Quantitative Easing at a time like this can prevent an unwarranted tightening in financial conditions, such as the tightening we observed in late March this year,” he said.
“To be clear, that is not monetary financing or fiscal dominance. It is instead the support of private finance, via a well-functioning financial system, for the economy and thus for consumption and investment. Investment has to be financed.”
The specs
Engine: 1.6-litre 4-cyl turbo
Power: 217hp at 5,750rpm
Torque: 300Nm at 1,900rpm
Transmission: eight-speed auto
Price: from Dh130,000
On sale: now
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Need to know
When: October 17 until November 10
Cost: Entry is free but some events require prior registration
Where: Various locations including National Theatre (Abu Dhabi), Abu Dhabi Cultural Center, Zayed University Promenade, Beach Rotana (Abu Dhabi), Vox Cinemas at Yas Mall, Sharjah Youth Center
What: The Korea Festival will feature art exhibitions, a B-boy dance show, a mini K-pop concert, traditional dance and music performances, food tastings, a beauty seminar, and more.
For more information: www.koreafestivaluae.com
Sheer grandeur
The Owo building is 14 storeys high, seven of which are below ground, with the 30,000 square feet of amenities located subterranean, including a 16-seat private cinema, seven lounges, a gym, games room, treatment suites and bicycle storage.
A clear distinction between the residences and the Raffles hotel with the amenities operated separately.
Vaccine Progress in the Middle East
Tailors and retailers miss out on back-to-school rush
Tailors and retailers across the city said it was an ominous start to what is usually a busy season for sales.
With many parents opting to continue home learning for their children, the usual rush to buy school uniforms was muted this year.
“So far we have taken about 70 to 80 orders for items like shirts and trousers,” said Vikram Attrai, manager at Stallion Bespoke Tailors in Dubai.
“Last year in the same period we had about 200 orders and lots of demand.
“We custom fit uniform pieces and use materials such as cotton, wool and cashmere.
“Depending on size, a white shirt with logo is priced at about Dh100 to Dh150 and shorts, trousers, skirts and dresses cost between Dh150 to Dh250 a piece.”
A spokesman for Threads, a uniform shop based in Times Square Centre Dubai, said customer footfall had slowed down dramatically over the past few months.
“Now parents have the option to keep children doing online learning they don’t need uniforms so it has quietened down.”
How to watch Ireland v Pakistan in UAE
When: The one-off Test starts on Friday, May 11
What time: Each day’s play is scheduled to start at 2pm UAE time.
TV: The match will be broadcast on OSN Sports Cricket HD. Subscribers to the channel can also stream the action live on OSN Play.
If you go
The flights
There are various ways of getting to the southern Serengeti in Tanzania from the UAE. The exact route and airstrip depends on your overall trip itinerary and which camp you’re staying at.
Flydubai flies direct from Dubai to Kilimanjaro International Airport from Dh1,350 return, including taxes; this can be followed by a short flight from Kilimanjaro to the Serengeti with Coastal Aviation from about US$700 (Dh2,500) return, including taxes. Kenya Airways, Emirates and Etihad offer flights via Nairobi or Dar es Salaam.
The specs
Engine: 2.0-litre 4-cyl turbo
Power: 201hp at 5,200rpm
Torque: 320Nm at 1,750-4,000rpm
Transmission: 6-speed auto
Fuel consumption: 8.7L/100km
Price: Dh133,900
On sale: now
Fighter profiles
Gabrieli Pessanha (Brazil)
Reigning Abu Dhabi World Pro champion in the 95kg division, virtually unbeatable in her weight class. Known for her pressure game but also dangerous with her back on the mat.
Nathiely de Jesus, 23, (Brazil)
Two-time World Pro champion renowned for her aggressive game. She is tall and most feared by her opponents for both her triangles and arm-bar attacks.
Thamara Ferreira, 24, (Brazil)
Since her brown belt days, Ferreira has been dominating the 70kg, in both the World Pro and the Grand Slams. With a very aggressive game.
Samantha Cook, 32, (Britain)
One of the biggest talents coming out of Europe in recent times. She is known for a highly technical game and bringing her A game to the table as always.
Kendall Reusing, 22, (USA)
Another young gun ready to explode in the big leagues. The Californian resident is a powerhouse in the -95kg division. Her duels with Pessanha have been highlights in the Grand Slams.
Martina Gramenius, 32, (Sweden)
Already a two-time Grand Slam champion in the current season. Gramenius won golds in the 70kg, in both in Moscow and Tokyo, to earn a spot in the inaugural Queen of Mats.
How to apply for a drone permit
- Individuals must register on UAE Drone app or website using their UAE Pass
- Add all their personal details, including name, nationality, passport number, Emiratis ID, email and phone number
- Upload the training certificate from a centre accredited by the GCAA
- Submit their request
What are the regulations?
- Fly it within visual line of sight
- Never over populated areas
- Ensure maximum flying height of 400 feet (122 metres) above ground level is not crossed
- Users must avoid flying over restricted areas listed on the UAE Drone app
- Only fly the drone during the day, and never at night
- Should have a live feed of the drone flight
- Drones must weigh 5 kg or less
TOP%2010%20MOST%20POLLUTED%20CITIES
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Abu Dhabi Equestrian Club race card
5pm: Abu Dhabi Fillies Classic (PA) Prestige; Dh110,000; 1,400m
5.30pm: Abu Dhabi Colts Classic (PA) Prestige; Dh110,000; 1,400m
6pm: Maiden (PA); Dh80,000; 1,600m
6.30pm: Abu Dhabi Championship (PA) Listed; Dh180,000; 1,600m
7pm: Wathba Stallions Cup (PA) Handicap; Dh70,000; 2,200m
7.30pm: Handicap (PA); Dh100,000; 2,400m
RESULTS
1.30pm Handicap (PA) Dh 50,000 (Dirt) 1,400m
Winner AF Almomayaz, Hugo Lebouc (jockey), Ali Rashid Al Raihe (trainer)
2pm Handicap (TB) Dh 84,000 (D) 1,400m
Winner Karaginsky, Tadhg O’Shea, Satish Seemar.
2.30pm Maiden (TB) Dh 60,000 (D) 1,200m
Winner Sadeedd, Ryan Curatolo, Nicholas Bachalard.
3pm Conditions (TB) Dh 100,000 (D) 1,950m
Winner Blue Sovereign, Clement Lecoeuvre, Erwan Charpy.
3.30pm Handicap (TB) Dh 76,000 (D) 1,800m
Winner Tailor’s Row, Royston Ffrench, Salem bin Ghadayer.
4pm Maiden (TB) Dh 60,000 (D) 1,600m
Winner Bladesmith, Tadhg O’Shea, Satish Seemar.
4.30pm Handicap (TB) Dh 68,000 (D) 1,000m
Winner Shanaghai City, Fabrice Veron, Rashed Bouresly.
SERIE A FIXTURES
Friday Sassuolo v Benevento (Kick-off 11.45pm)
Saturday Crotone v Spezia (6pm), Torino v Udinese (9pm), Lazio v Verona (11.45pm)
Sunday Cagliari v Inter Milan (3.30pm), Atalanta v Fiorentina (6pm), Napoli v Sampdoria (6pm), Bologna v Roma (6pm), Genoa v Juventus (9pm), AC Milan v Parma (11.45pm)
Who was Alfred Nobel?
The Nobel Prize was created by wealthy Swedish chemist and entrepreneur Alfred Nobel.
- In his will he dictated that the bulk of his estate should be used to fund "prizes to those who, during the preceding year, have conferred the greatest benefit to humankind".
- Nobel is best known as the inventor of dynamite, but also wrote poetry and drama and could speak Russian, French, English and German by the age of 17. The five original prize categories reflect the interests closest to his heart.
- Nobel died in 1896 but it took until 1901, following a legal battle over his will, before the first prizes were awarded.
Racecard:
6.30pm: Mazrat Al Ruwayah (PA) | Group 2 | US$55,000 (Dirt) | 1,600 metres
7.05pm: Meydan Sprint (TB) | Group 2 | $250,000 (Turf) | 1,000m
7.40pm: Firebreak Stakes | Group 3 | $200,000 (D) | 1,600m
8.15pm: Meydan Trophy | Conditions (TB) | $100,000 (T) | 1,900m
8.50pm: Balanchine | Group 2 (TB) | $250,000 (T) | 1,800m
9.25pm: Handicap (TB) | $135,000 (D) | 1,200m
10pm: Handicap (TB) | $175,000 (T) | 2,410m.
The specs
Engine: Direct injection 4-cylinder 1.4-litre
Power: 150hp
Torque: 250Nm
Price: From Dh139,000
On sale: Now
