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Business interview: Bank of England's Andy Haldane says Brexit ­has put the brakes on UK

Mark Shapland

Over the past few weeks economists and central bankers have run around telling anyone who will listen that a messy Brexit could trigger interest rate cuts and deep economic uncertainty.

Not Andy Haldane. With just two weeks until the country is due to uncouple from our nearest trading partner, the Bank of England chief economist and monetary policy committee member is in a remarkably sanguine mood.

He’s stretched across a rich yellow sofa in his sumptuous Threadneedle Street office.

The whippet-thin former fast bowler starts by giving me a strict agenda for what we can and cannot talk about. But he’s too interested in everything about his job to keep to his own rules.

On Brexit, Haldane makes clear the Bank is prepared for all eventualities. “We are very well prepared. We have done our homework from the day after the referendum and we will be better prepared whatever the Brexit outcome and whatever takes place.”

This confidence stems from his belief that UK plc is in its strongest position for 30 years. “If our economy were a company right now we’d say it had a strong balance sheet, strong cashflow statement and a weak P&L. It’s not generating much value add, GDP growth.”

It appears a casual attitude towards GDP, given that the UK only just avoided recession in August, but he says he has crunched the data and that, once the Brexit cloud has lifted, businesses will have the confidence to invest and grow again.

“It’s totally understandable many companies pressed the pause button on their investment plans over the past 24 months. They’ve got ever closer to a Brexit fork in the road, they’re not sure which fork will be taken by the economy and so the car has slowed. But this car has not stalled, the engine has not failed.

“As and when that cloud were to lift, the underlying investment fundamentals here for companies are very strong. My hope would be if that cloud were to lift that business investment would see some significant uptick.”

If that happens Haldane also sees the Bank moving in a different direction from the role it has had over the past 10 years.

For one, he thinks the Old Lady will play less of a role in people’s everyday lives, hinting that the age of the rock-star central banker could end when current Governor Mark Carney leaves the building.

With inflation near the Bank’s target, unemployment at historic lows and real wage growth returning, Haldane believes the problems are now on the supply side.

“The labour market is tight, unemployment remains low, vacancies remain high and pay is picking up at a fair old clip. We’ve seen pay go through the gears, normalish service has been resumed … The engine of the economy nationally and at the company and bank level is in a strong place and we should not lose sight of that.”

He adds that it is now up to the Government and businesses to invest: spending on education, training and large-scale infrastructure projects, including transport.

“For growth in the future it’s important we don’t look to our friendly central banker as we have for the past ten years. Now with the output gap closed, growing the economy is about growing the supply side and productive potential rather than the demand side and that calls for a different set of tools and policies.

"Many of the things that the Government is discussing right now, the infrastructure revolution that the Chancellor has spoken about, the investment in skills, further education as well as higher education. These will be the key ingredients of growth in people’s pay packets over the next ten years rather than the actions of the institution I sit in today.”

Haldane will have a direct role in how this plays out as he was made chair of the Government’s Industrial Strategy Council last year, something he calls his “night job”.

He is responsible for making sure the Government keeps to its policies to help improve productivity, which has hampered the UK since the Nineties. He wants to see the problem solved given the low interest rate environment.

“We are in an environment where the cost of capital for both companies and government is as best as I can tell in human history. If the return, whether private or social, for that investment right now is some number north of zero then the case begins to be made.”

Haldane is a Bank lifer. He attended a comprehensive school in Leeds, before earning an economics degree from the University of Sheffield and a Masters from Warwick.

He started in 1989. In 2009 he became executive director of financial stability and in 2014 he was appointed to the MPC.

At 52, he has a lot on his plate and, with a decision imminent on who will be the next Bank of England Governor, he could be about to have even more.

I ask if he applied for the job and he snaps back: “Yeah, I’m not going to get into that.”

Many in the City feel he is more likely to become Governor under Labour given his support for the Occupy Movement in 2012 and his willingness to discuss radical ideas in public.

For instance, in 2015 he said the Bank of England could set negative interest rates long before the idea was fashionable. He rails against this image though, simply stating that it is his job as an economist to discuss ideas and be brave.

He adds he’s not unpredictable, just occasionally ahead of the curve. The last time there was a 9-0 vote for a rate rise, in August 2018, he and Michael Saunders were the only two of the current members who had voted for a rise in June.

“The one time I’ve dissented on a rate rise we found at the subsequent meeting the MPC voting 9-0 to raise interest rates. In a sense that was quite a predictable thing to have done in that we saw the whole of the MPC vote for it a few weeks later.”

He admits he has been institutionalised and defends the Bank the way many would back their football team. He comes out fighting on quantitative easing, a policy that has been much maligned. But he’s defiant and says it was the right thing to do.

He adds that part of its purpose was to raise asset prices.

“Without it we’d have half a million more people unemployed in this country. Some of the critiques that it increases inequality, they’re just not true. It has lifted all boats roughly equally.

"If you have someone sitting on a million pounds worth of wealth to begin with, if that goes up 10% that’s a bigger money amount than someone sitting on £1. There’s nothing we can do about that. That's just telling you that the distribution of incomes in unequal to begin with. We haven't made it any worse.

"I'm not pretending everyone is a winner from all monetary actions we take."

With that I’m shown the door, out on to the street and back in the real world.