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Coronavirus economic spillover in UK containable, says Bank boss

Outgoing Bank of England governor Mark Carney said the estimated impact on China’s economic growth is ‘significant’.

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Bank of England boss Mark Carney said the economic impact of the coronavirus in the UK is containable but warned the global growth hit is set to be worse than seen during the Sars outbreak (PA)

Bank of England boss Mark Carney said the economic impact of the coronavirus in the UK is containable but warned the global growth hit is set to be worse than seen during the Sars outbreak (PA)

Bank of England boss Mark Carney said the economic impact of the coronavirus in the UK is containable but warned the global growth hit is set to be worse than seen during the Sars outbreak (PA)

Bank of England boss Mark Carney has said the economic impact of the coronavirus in the UK is “containable”, but warned that the hit to China’s growth is set to be worse than seen during the Sars outbreak.

Governor Mark Carney told the House of Lords that experts were estimating the coronavirus outbreak could send Chinese growth down to as low as 4.5% from 6% currently.

Mr Carney, who is handing over the reins next month to Financial Conduct Authority boss Andrew Bailey, told the Economic Affairs Committee while this was “significant”, the Bank had tested the UK financial system against scenarios that are far worse.

He said: “We have stress-tested the UK system and particularly the UK banks to something much greater than that.”

From an economic perspective, it is already bigger than SarsMark Carney, Bank of England governor

“The spillover would be containable,” he said.

But he added: “From an economic perspective, it is already bigger than Sars.”

When questioned on the UK interest rates outlook, Mr Carney told the committee they are set to remain low for the “foreseeable future” as Brexit uncertainty has contributed to pushing UK growth to a new lower speed limit.

He said any rate movements – and increases in particular – would be “modest”.

His comments come after the Bank held rates at 0.75% late last month, though two policymakers repeated their vote for a cut to 0.5%.

He told the committee that low rates would help the economy, by cutting debt costs.

Mr Carney said: “We would expect that interest rates are going to remain low for the foreseeable future and the adjustments will be relatively modest.”

He added: “Upwards adjustments will be relatively modest.”

The committee heard that Brexit uncertainty had contributed to Britain’s disappointing economic productivity and pushed the country to a new lower growth speed limit of around 1.1% on average over the next few years.

But Mr Carney said the upcoming Budget may have an effect on the growth outlook if the Chancellor delivers a fiscal spending boost.

He said more public and corporate investment and infrastructure projects are needed to help lift growth.

“This is an environment in which, yes, the right infrastructure, the right corporate investment projects, make sense and will be necessary in order to ultimately get us out of this situation,” he said.

The Bank recently slashed its growth outlook to just 0.8% in 2020, 1.4% in 2021 and 1.7% in 2022.

PA