The Bank of England’s Monetary Policy Committee (MPC) has confirmed that the heavy snow and ensuing disruption caused by the so-called ‘Beast from the East’ are likely to have a measurable and adverse effect on the UK’s growth in the first quarter of this year.
The Bank changed its forecast for first quarter growth of 0.4 per cent down to 0.3 per cent “after incorporating an initial judgment on the impact of the snow-related news”. However, it was agreed that the effects on the economy of the bad weather will only be temporary.
In addition, the majority of MPC members voted to leave interest rates on hold at its most recent meeting. However, they made it clear that a second hike to the rate in six months is likely to happen soon.
The Bank increased its base interest rate from 0.25 per cent to 0.5 per cent in November last year, having the left the rate unchanged for more than a decade as a response to the financial crisis.
The Bank also predicted that the recent surge in the UK’s productivity growth is likely to fade in the first quarter of the year. This opinion chimes with recent data that suggests the UK is set to lag behind the Eurozone in a productivity revival.
Eurozone labour productivity growth rose by one per cent in 2017 and is forecast to increase by 1.1 per cent this year. However, while the UK’s productivity rate has also risen, from 0.6 per cent in 2017 to a projected 0.8 per cent this year, this is far behind the 2.1 per cent achieved by the UK before 2008.