Businesses need to ignore the current “fog of uncertainty” and boost investment in kit and people as it is in their interest and that of the wider economy, the Bank of England’s chief economist has said.
Andy Haldane urged companies to look beyond the pandemic and begin preparing for the changes that will follow. A big shift to digital is under way and there is little point in waiting, he said at an FT Moral Money event.
“The missing ingredient in the recovery, both globally and locally in the UK has been spending by companies,” he said. “Would it be desirable if companies were to feel able to begin investing, whether in people or in [equipement] in the period ahead? Yes it absolutely would.”
Business investment fell by 26.5 per cent in the three months to June as companies sought to save cash. Many are still struggling to meet their fixed costs, let alone make new investments.
While acknowledging that the pandemic had produced a “fog of uncertainty right now which is unlikely to lift any time soon”, Mr Haldane said there was no advantage to waiting for those that are confident they will get through the crisis.
“The business model of the future for many corporations will not be the same as the business model of the past, it will have a much larger digital dimension to it,” he said. “Holding off in making that investment in digital kit or skills would not be worthwhile right now, it is worth bringing forward.”
Mr Haldane, 53, has been a rare optimistic voice during the crisis, declaring early on that the recovery was likely to be V-shaped. This week he warned against “Chicken Licken” economic doom-mongering.