Coronavirus risks UK economic downgrade, Mark Carney warns
The UK faces the prospect of faltering economic growth as a result of the coronavirus outbreak, Bank of England governor Mark Carney warned today.
The Bank has already spotted a squeeze on world supply chains from the coronavirus epidemic that started in China at the turn of the New Year, Carney said.
While it is too early to predict the size of the economic hit on the UK, there will be one as a result of less economic activity, Carney told Sky News.
“What we are picking up with some of our bigger companies and companies around the world is that supply chains… are getting a little tight,” Carney said. “That’s lower activity.
“There’s less tourism – as you can see on our streets here in the UK. That’s lower activity as well.
“We would expect world growth would be lower than it otherwise would be, and that has a knock-on effect on the UK.
“We’re not picking that up yet at all in the European and UK economic indicators, but if the world is slower than the UK, a very open economy, will have an impact.”
As a result the Bank is monitoring British banks to ensure they are robust enough to avoid the Covid-19 crisis prompting another financial crisis.
“It’s too early to tell what it means for the UK, or its magnitude,” he told Sky.
“But the most important thing is to make sure the system is functioning. We’re very confident about that, and we’re on top of it.”
His comments came after Northern Ireland confirmed its first case of coronavirus yesterday. And the UK counted two more cases of Covid-19 to bring its total to 15.
The coronavirus outbreak wrought havoc on global stocks yesterday as cases outside China spiked.
So far this week the spreading coronavirus threat has wiped £158bn off the FTSE 100, according to AJ Bell.
Global stocks have lost £2.9 trillion.
Brexit
Carney also warned of the UK’s low productivity, which a former Bank executive has also warned CityAM is a growing threat to capitalism.
He also said it was “too early to tell” whether Brexit could harm the economy. Previously Carney has issued dire worst case scenario forecasts for Brexit, had the UK left the EU without a deal.
“I guess it’s too early to tell. I think the economy will go through a period of reorganisation,” he said. “That will have an impact for a time. But [in the long run] it is too early to tell.”
Climate change
And Carney also spoke of his new role as a climate change financial adviser at the United Nations on the Prime Minister’s behalf.
He told Sky that a zero carbon economy would need substantial business investment. But opportunities exist for firms that decide to invest.
“The measures that are needed in order to move towards net zero are associated with huge swaths of investment in the economy,” he said. “Investment, not cost.
“BP was pointing out a couple of weeks ago there are huge opportunities in artificial intelligence and advanced materials, huge opportunities in just the way commerce is organised.
“All of those opportunities are growth.”