Uncertainty ‘a drag’ on UK economy

Uncertainty in the eurozone will continue for the next few years, acting as a drag on the UK economy, Bank of England policy maker Spencer Dale was quoted as saying yesterday.

Despite not being a member of the single currency bloc, Britain depends on the economic area for 40% of exports.

The British economy slipped back into recession in the first quarter of this year and data continues to show Britons have been shopping much less and factories are getting fewer orders.

“I’d expect the uncertainty [in the eurozone] to continue for the next few years, even if some of the worst outcomes are avoided,” Mr Dale was quoted in the Sunday Times as saying. “It will continue to act as a drag on our economy.”

An increasing perception is that Greece or other debt-laden countries might have to leave the 17-country single currency bloc.

In minutes of its May meeting, the Bank of England voted to end a £325bn (€406bn) round of asset buying, or quantitative easing, to help the struggling British economy.

“Some people say we can just pump more into the economy with QE, but if weak growth reflects problems on the supply side of the economy, that may not be appropriate,” Mr Dale told the paper.

The inflation outlook had swayed the majority of the Bank of England policy makers to vote against expanding the existing asset purchase programme.

“I said, last year, that the fall in inflation from 5% to 3% was ‘baked in the cake’ but that the real test would be getting from 3% to the 2% target,” Mr Dale said.