Bank of England deputy governor Ben Broadbent has said policymakers had been too pessimistic about the immediate aftermath of the Brexit vote, but warned of an “insidious” threat to business investment.

“There’s little doubt that the economy has performed better than surveys suggested immediately after the referendum and ... somewhat more strongly than our near-term forecasts as well,” Broadbent said in a speech at the Wall Street Journal’s offices in London.

“The central projection in the August inflation report didn’t involve a recession, simply a slowing in the economy’s rate of growth. But that slowing looks so far to have been more moderate than we feared.”



But the deputy governor cautioned against reading too much into individual pieces of data following the UK’s decision to leave the EU.

He said that while consumer spending would be “relatively unperturbed”, the greater risk would be a hit to business investment, as companies hold off on big spending commitments because of heightened uncertainty.

“A lack of clarity about the UK’s future trading relationships needn’t result in visible, headline-grabbing closures of productive capacity. The effect is likely to be more insidious: decisions to expand, that might otherwise have been taken, are delayed.”

Last week the Japanese carmaker Nissan said it could scrap a potential new investment at its Sunderland factory unless the UK government pledged to compensate it for any tariffs imposed after Brexit.

Broadbent said a combination of factors had probably helped the UK economy in the aftermath of the Brexit vote, including strong domestic demand and a weaker pound.

He defended the Bank against the accusation that its policy of ultra low interest rates was driving up pension deficits.

In August the Bank announced measures to support the economy following the Brexit vote. Interest rates were cut to an all-time low of 0.25%, and the Bank increased its asset purchasing programme – quantitative easing – by £60bn to £435bn.

Broadbent suggested that while looser monetary policy did play a part in rising deficits – because lower bond yields increase pension liabilities – the key driver was the economic backdrop.

“The decline in policy rates is a symptom not a cause of the forces shaping the global economy,” Broadbent said.



“The main thing to understand is that, even if domestic monetary policy has some bearing on real interest rates, at least for a while, it is not their ultimate determinant.”



He said that while looser monetary policy tended to drive bond yields lower, historically it also tended to increase the value of assets, benefiting pension funds.

“But over the past decade or so, equities and bonds have been negatively correlated. More to the point, the general tendency has been for bonds to do well – for yields to decline – and equities poorly.

“It’s this outperformance of the safe asset, highly unusual over such a sustained period, that has been the main problem for defined benefit [pension] schemes.”