Newspaper article The Evening Standard (London, England)

Let's Hope Bank's Upbeat Newcomer Is on the Money

Newspaper article The Evening Standard (London, England)

Let's Hope Bank's Upbeat Newcomer Is on the Money

Article excerpt

Byline: ECONOMIC ANALYSIS Russell Lynch

JANUARY can be a pretty bleak month dry or not so we should tip our hats to the Bank of England's newest rate-setter this week for giving us reasons to be cheerful.

Silvana Tenreyro's speech at London's Queen Mary University the first from a monetary policy committee member this year had some interesting things to say about UK's productivity woes, and why there might be reasons for optimism. Productivity the ability to get more bang for your economic buck boosts profits, funds pay-rises, and brings down costs, improving competitiveness. On this the UK is way behind its G7 rivals, producing in five days what takes them four on average.

But Tenreyro is optimistic about the longer term, saying our firms "have all the fundamental factors in their favour to be at the technological frontier". They include "an advantageous institutional and legal framework, a favourable geographic location, top-rate research and innovation centres and the human capital to harness resources to foster growth".

It's all cheery stuff, but attentive readers might well pause at this point and scratch their head. That's because Threadneedle Street was in glum mood in November, saying the "speed limit" at which the economy could grow had fallen. In the Budget, the Office for Budget Responsibility got fed up with waiting for a productivity recovery a decade after the crash and cut its own forecasts, hitting growth and revenue forecasts. But in typical fashion, just as the big beasts decided to get their red pens out, the figures improved. Official data released earlier this month showed productivity growing at 0.9% in the quarter to September its best since early 2011 reflecting steady GDP growth while employment eased slightly.

Tenreyro's argument is that just two sectors finance and manufacturing account for most of the fall in productivity growth since the crash, and that here the prospects are more positive. …

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