BANK of England deputy governor Paul Tucker has hailed North East businesses’ hard work to move out of recession, following a “heartening” visit to the region.
Tucker – one of nine members of the Bank’s Monetary Policy Committee (MPC) with responsibility for financial stability – met with business contacts at Sage Gateshead to gauge the region’s economic mood, poignantly timed ahead of the committee’s quarterly forecast round to predict growth in the economy and the outlook for inflation.
Ahead of that vital meeting, the deputy, who also toured Sunderland’s Nissan plant during the trip, believes the North East and the rest of the UK is at last turning the corner and facing the future with optimism.
However, following last week’s GDP figures signaling a return to growth, Tucker noted cautious optimism and said there is still a way to go.
He said: “At Nissan I was immensely impressed to see just their set up, to hear what they are doing and their ambitions. It’s an interesting thing that if you look back on 2012 it was really construction and the energy sector that pulled the economy down
“Manufacturing and services grew by over 1% in 2012, which isn’t exciting but it is consistent with recovery and I say that because that was the tone of discussions here.
“I didn’t meet a group of people from an economy that was flat on its back. On the contrary.
“Many of them are having to work pretty hard but I had a sense of an economy that was starting to repair and where, if we can just sustain it for a few more quarters we really can begin to turn the corner again.
“We shouldn’t get too excited by one quarter but looking over the past year it’s perhaps not as bad as the headline figures suggest, so I think there’s a long way to go but there’s certainly reason for hope.”
Tucker said the Bank of England is resolved to aid the UK’s recovery through, and hopes to see results from the extension of the Funding for Lending Scheme announced last week.
Since its introduction last year Tucker acknowledged that the Funding for Lending scheme had not helped SMEs as much as it had larger firms and mortgages, but is hopeful of seeing an improvement by autumn.
“At the Bank of England we have to ensure we continue the economy’s recovery, consistent with keeping inflation under control. In the last week we extended our Funding for Lending scheme, a scheme we have making it easier for banks to lend to the mortgage market and small and medium enterprises, and we have increased the incentives for banks and non-bank lenders to lend to small and medium-sized companies because they are immensely important to the economy.
“So far it’s worked better for mortgages than it’s worked for businesses – I don’t think its success should be measured though by how much people borrow directly from us, but really how much we can affect the cost of finance from banks to companies and then the cost of finance from banks to companies.
“Now we will have to wait for a couple of quarters to wait and see what difference it makes.
“This no silver bullet but we should do what we can to improve the supply of credit in the economy and I think this can be a real help.”
In February Tucker suggested high street banks could be charged a negative interest rate in a bid to encourage more lending to small businesses, an idea he now believes will not happen.
“It’s most unlikely it would happen in the context of the debate within parliament but it’s important that we are open and that we should think about all sorts of things,” he said.
He added: “I wouldn’t want the public to think that we sit on our hands and know the answers to everything – we are always trying to think about new things.
“This is one of the regular round of visits, so that we get out of our ivory towers, and I must say it’s been massively heartening.’’