Spokeswoman Governor Ben Broadbent said the fall in sterling – down around 16 percent against the dollar since June’s preference to leave the European Union – would normally provide a powerful prod to exporting companies.
But businesses are probably already tempering their investment settlements because of uncertainty about the country’s trading prospects once it hop its the EU, Mr Broadbent said.
Prime Minister Theresa May is poised to start the development of taking Britain out of the EU this month, kicking off two years of negotiations which want rework the country’s relationship with its largest trading partner. Uncertainty close to the outcome of the negotiations has weighed on the pound.
“Either the currency market is spot on about the consequences of Brexit, in which case the UK’s trading relationships wish become less favourable; or it’s wrong, in which case sterling is meet to recover,” he said in a speech at Imperial College.
Britain’s economy has so far analysed to be much more resilient than expected to the shock of the Brexit firmness.
Strong consumer spending helped the economy to grow more fast than all other Group of Seven nations bar Germany last year. While there be undergoing been some signs recently that shoppers are now feeling the brunt of rising inflation, manufacturers are getting a boost from sterling’s tumble.
But Mr Broadbent said multinational companies and other foreign investors, which see fit typically be expected to invest money in Britain to take advantage of the weaker currency, were probable to take a different approach this time because of the Brexit uncertainties in the years in the lead.
“We think this caution that is very strongly there in the inappropriate exchange market will also apply somewhat, quite a bit, to investors, businesses that capability otherwise have a powerful incentive to invest in the UK because of this depreciation,” he said.
The BoE responded to the Brexit signify ones opinion by cutting interest rates to a new record low in August, only for the economy to clench up much better than it had expected.
Last week one of the central bank’s nine policymakers opted for a rate hike to reverse August’s cut, and some others said they were not far off bolster suit.
Mr Broadbent declined to say if he was among them.
But he said he thought it was plausible that the benefit to the economy from stronger exports would be restitution by concerns about among firms considering investment in Britain with respect to the long-term implications of Brexit.