Britain’s economy is undergoing lasting changes as a result of the COVID-19 pandemic and the financial services industry must make a “major commitment” to support the investment that will be needed, Bank of England Governor Andrew Bailey said.
While the pandemic was unlikely to prompt the huge shifts in Britain’s industrial makeup that took place in the 1980s and 1990s, Bailey said there was no room for complacency.
“None of us have good answers yet to how much these changes will persist, or even increase. But my best guess is that there will be lasting changes,” Bailey said in a speech to TheCityUk, a financial services industry group.
The changes brought by COVID, and the challenge of addressing climate change, would require a “major commitment” from the financial services industry, Bailey said.
They also underlined the importance behind a drive at the BoE to look at how the financial system can spur more productive investment.
Bailey warned that authorities would keep an eye on risks from higher debt levels.
“While the current low level of interest rates supports the sustainability of UK corporate debt, higher leverage would make the corporate sector more vulnerable to interest rate or earnings shocks,” he said.
Britain’s economy on course for its worst year in a century and Bailey pointed to a muted outlook for investment next year because of the pandemic but also uncertainty about Brexit.
But the recent news about positive COVID-19 vaccine trials represented “some light at the end of the tunnel,” he said.