Spend and hire more, Bank of England chief economist tells firms

Businesses should step up hiring and investment to boost their own prospects and that of the wider economy, Andy Haldane has urged.

The Bank of England’s chief economist said companies were holding off spending because of uncertainty around coronavirus, but should instead be investing in digital skills and equipment to enhance their growth prospects.

“The missing ingredient in the recovery both globally and locally in the UK has been spending by companies,” Mr Haldane said.

“Would it be desirable if companies were to feel able to begin investing, whether in people or in [equipment] in the period ahead? Yes it absolutely would.”

Investment fell by more than one-quarter in the second quarter of the year, official figures showed.

There is a “fog of uncertainty right now which is unlikely to lift any time soon” he said, but added that was no reason to fail to spend.

“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 told the FT Moral Money conference.

“Holding off in making that investment with digital kit or skills would not be worthwhile right now - it is worth bringing forward, rather than pushing it back, despite the uncertainty.

“Although we might be uncertain about demand tomorrow, we can be pretty certain the business model of tomorrow will require most of those things, in which case why not make the investment in those things now rather than hold off?”

Regulators have done their bit in adopting unusual policies to help the economy through this crisis, he added, arguing it is now time for businesses to do the same.

“That same mood of cautious risk-taking needs to occur within the corporate sector as well,” he said.

UK GDP shrank by a record 19.8pc in the second quarter, official data confirmed yesterday, making it Britain’s worst quarter on record.

But earlier this week Mr Haldane urged more confidence in the economy, warning against “the economics of Chicken Licken”, in a reference to the folktale of a chicken who was hit on the head with an acorn and began spouting doom-laden prophecies.

“Collective anxiety is as contagious, and could be as damaging to our well-being, as this terrible disease,” he said in a speech to businesses in the north west of England.

“Encouraging news about the present needs not to be drowned out by fears for the future.”