A lot has changed since the Bank of England opened its first outpost in Yorkshire nearly two centuries ago. The original purpose of the Bank’s first branch in Leeds was to provide a base for distributing bank notes around the county, a function that’s still carried out from the city’s cash centre. But it wasn’t long before local Agents were also appointed in the Bank’s regional outposts, whose job it was to liaise with local commerce and industry.
Back then the Agents were described as “men of private means with influence in the local business community”, who were appointed by the Governor of the Bank. From the 1930s, part of their role was to send regular reports back to Threadneedle Street reflecting on the conversations they had undertaken with local businesses.
I’m pleased to report that these days the Bank’s Agents are a rather more diverse bunch than our predecessors of the last century. And, although we still send regular reports to head office, our remit has got rather broader too.
Just as the powers of the Bank of England have increased over recent years, with our new responsibilities for overseeing the stability of the UK’s financial system and for supervising banks and some other financial institutions, so the job of the Agents has changed.
In line with those new responsibilities, we’ve expanded our interest in access to finance for companies of all sizes to financial risk more generally. We’re also listening to a more diverse range of voices including charities and others in the third sector and, as ever, evolving our contacts to reflect new and changing sectors such as digital.
And when we host visits from senior policymakers we’re not just taking them to meet our business contacts – although that remains an important part of any trip – but also organising visits to other organisations, including local schools.
We’re also using a wider range of communication tools – for example, you can now follow the Yorkshire and the Humber Agency on Twitter.
The need to engage more effectively with a broader range of stakeholders was a key message that emerged from the Bank’s Future Forum events that took place in the Midlands in October, which included a large public meeting in Birmingham involving the governor Mark Carney and the deputy governors covering all aspects of the Bank’s activities.
Above all, that means talking in more straightforward language that real people understand because, ultimately, the stuff we talk about really matters to their lives – be that the cost of filling up the car or how much interest they’ll be paying on their mortgage next month.
That said, our conversations with members of the business community remain the bread and butter of the life of an Agent. Because it is those of you who run and work in companies across Yorkshire and the Humber who are the ones creating the wealth and jobs that are at the heart of our economy.
It’s a real privilege of our job to hear about the challenges, opportunities and issues that companies face on a day-to-day basis – and we remain extremely grateful for the time that busy senior business leaders give us so that we can better understand what is happening in the economy and the way the world is evolving.
Rarely have their insights been more valuable than today. Since the referendum on Britain’s membership of the European Union there has been a lot of uncertainty about what the future holds and Agents can provide policymakers with insight into conditions today and firms’ expectations for the future.
The Bank’s two policy making committees – the Monetary Policy Committee (MPC) who focus on delivering sustainable low inflation and the Financial Policy Committee who promote financial stability - have to make assessments based on data available at the time of their meetings. Understanding how the referendum might impact the economy has been challenging.
The Bank’s network of contacts, including several hundred companies here in Yorkshire and the Humber, have helped to inform their thinking. This happens both via the intelligence fed to them via the Agents, the surveys we carry out, and through one-to-one conversations members of the committee have with our contacts during their visits.
So what is our current view of the state of the economy here in our region and the UK more generally? As you’ll be aware, back in August the MPC announced a package of measures to support the economy, including a cut in Bank Rate to 0.25%. Based on the data available at that time, the Committee judged that the UK economy was likely to see little growth in the second half of 2016.
In light of the tendency for survey indicators to overreact to unexpected events, the committee expected some bounce-back in surveys of business and consumer sentiment following the sharp falls in the immediate aftermath of the vote to leave the European Union.
Nevertheless, since the August Inflation Report, a number of indicators of near-term economic activity have been somewhat stronger than expected. The committee set out its latest thinking in November’s Inflation Report.
Uncertainty remains high but the MPC’s growth forecast for next year is stronger than that set out back in August, reflecting the economy’s robust recent performance. Recent growth has been supported by the package of measures introduced in August, including the small cut in interest rates which reduced the cost of mortgages and finance.
But the outlook for 2017 and 2018 is weaker, partly because the lower value of the pound will make imports more expensive which is expected to push up prices. Rising inflation is then likely to weigh on consumer spending growth.
Also, the elevated level of uncertainty in the economy does appear to be weighing on companies’ investment plans, consistent with the MPC’s judgement in August that business spending would slow more sharply than consumer spending.
That outlook is consistent with the evidence we hear from our contacts here in Yorkshire and the Humber. For many, little has changed since the referendum at the end of June, whilst for others, particularly those exposed to international trade, the fall in the value of sterling has, or will, have an impact - be that positive or negative.
Faced with a period of inflation above its 2% target, the Bank might be expected to increase interest rates. But that period will be temporary. And it is expected to happen alongside modest growth and rising unemployment.
The Bank has therefore decided to leave its interest rate unchanged at 0.25%. But it has said that policy could respond in either direction, depending on how inflation and growth prospects develop.
Economic forecasting is a tricky job at the best of times. When uncertainty rises, that job becomes even more difficult. In the short time between me writing this column and the magazine landing on the doormat of your office, the outlook will have changed again.
So, as this story unfolds, the reports the MPC hear from our Agency contacts are vital.
One thing we can say for certain is that the Yorkshire economy looks in good shape to tackle whatever lies ahead, with employment levels at record highs and an economy that feels increasingly diverse and vibrant. And the spirit of resilience and versatility that has seen businesses through the tough times of the last decade or so remains firmly in evidence.
Whether your business is a stalwart of the region’s business community that’s been hosting visits from Bank of England Agents for many decades or an up-and-coming SME yet to receive our call, that resilience has to be a source of encouragement as you look to 2017 and beyond.
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