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Carney optimistic for UK's post-EU economy

By Philip Smith

The outgoing governor of the Bank of England says Britain is addressing its greatest weakness: low productivity

Outgoing Bank of England governor Mark Carney says the UK is set to prosper in its newfound post-EU life.

Carney, whose predictions of economic despair should the UK leave, prior to the EU referendum in 2016, made him a cheerleader for Remain voters.

Yet the Canadian, whose seven-year tenure ends next month, has had something of a change of heart, claiming the UK is starting to address its greatest weakness: productivity.

“In an environment where everything is getting a fresh look, it’s fertile ground for taking a step back and making bigger changes than otherwise might have been made,” Carney told Reuters.

The 'fresh look' refers to the increase in UK public spending on major infrastructure projects – specifically HS2 - recently confirmed by the government after more than a decade of tighter controls.

“It’s early days but there are several initiatives that suggest that some of these opportunities are being grasped,” he said.

Even though Carney was commenting before yesterday’s shock change of Chancellor (finance minister) in the UK, the reaction from the markets to Rishi Sunak’s appointment is unlikely to impact the growing sense of a sea change.

Sunak, previously deputy to former Chancellor Sajid Javid, will present the nation’s budget on March 11 when it will become clearer whether the Treasury’s existing fiscal rules to allow an extra £22bn (€26.5bn, $28.7bn) public sector net investment a year will remain.

The BoE has estimated that the Brexit process has reduced productivity - a key gauge of how much an economy can grow over the longer term - by two per cent.

But it is this shift in the UK’s stance from austerity to big spending that has helped Carney see a brighter future with productivity increases at the heart.

“We are already seeing a rebound in confidence, business confidence and to some extent a firming of consumer confidence,” he said.

FURTHER READING: Bank of England's Carney hints at interest rate cut

FURTHER READING: Andrew Bailey appointed new governor of Bank of England

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