Second Covid won’t be as bad, says Bank of England boss

The Governor of the Bank of England said he didn’t believe a second wave of the coronavirus would be as economically damaging as the first, but suggested that some parts of the economy may have to undergo “structural change” in the wake of an uneven economic recovery.
The Governor of the Bank of England, Andrew Bailey, says some parts of the economy will need further support, but others may be subject to structural change.The Governor of the Bank of England, Andrew Bailey, says some parts of the economy will need further support, but others may be subject to structural change.
The Governor of the Bank of England, Andrew Bailey, says some parts of the economy will need further support, but others may be subject to structural change.

Andrew Bailey was speaking after taking part in an online roundtable discussion with Yorkshire business leaders during a “virtual visit” to the region.
He said: “We’ve got growing evidence of [Covid’s] return, and that is going to have complications.

“It obviously will add to the uncertainty, as will people’s natural reaction to this; there will be a degree of natural caution, and that will affect the economy.”

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But he added: “I don’t expect that the economic impact will be the same as in the spring.”

As the furlough scheme comes to an end on October 31, he was asked if the replacement Job Support Scheme would provide enough support for vulnerable sectors of the economy, such as hospitality.

He said: “The scheme is seeking to strike a balance that is inherently hard, but has to be struck.

“The real challenge we face now is that there are some sectors of the economy that need further support to sustain them through to full recovery, and I think the new scheme will provide that in the sense that it will provide incentives for employers to retain labour where there is a good prospect of activity coming back.

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“But there are other areas where we’ve got to face up to the question of how long the economy can go on for before some degree of structural change has to start to happen. It’s a hard one.”

But he said the Bank and the Government would continue to manage the economy aggressively to steer it through the Covid crisis.
“The policy tools will be used to the fullest extent to support the people and businesses of this country, because that’s our job. In fact, it’s a duty,” he said.

Mr Bailey stressed that the impact of the Covid pandemic was by far the greatest threat to the UK economy, but he said that the lack of a trade deal with the EU added to the insecurity.

“I do think it’s in the interests of both sides – let’s be blunt – to get an agreement. I strongly believe it’s the right outcome, and that of course would do a considerable amount to reduce uncertainty.”

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He added: “I’m surprised that the EU want to restrict where their citizens can do business. We will certainly keep our markets open to the world.”

He reiterated his view that the UK should not be bound by EU rules it has no part in making.

He said: “We can certainly have equivalent outcomes in our financial regulation. It’s even more important that we all stick to international standards which we’re all part of agreeing and negotiating.

“But we can’t be a rule-taker; I don’t think that is at all sustainable or correct.”