British banks could help to boost UK’s productivity growth
British banks could help to boost the UK’s productivity growth, according to Bank of England Monetary Policy Committee (MPC) member Silvana Tenreyro.
Delivering her first public speech as an MPC member, Tenreyro said that she believes UK banks have almost recovered from the financial crisis ten years ago, which could lead to a rise in UK productivity as the finance industry’s performance starts to improve.
UK banks were a main driver of productivity growth in the UK before the financial crisis, but a chart from Tenreyro, which contained figures from the Office for National Statistics, showed that financial services has been the worst-performing sector for productivity since 2009, after the crisis hit.
Whilst there has been little productivity growth in the UK over the past decade, Tenreyro was positive during her speech, stating that the drag in productivity caused by the finance sector after the crisis should disappear as deleveraging runs its course and that the UK can boost its output by establishing itself at the "technological frontier" in the future.
Tenreyro believes that the financial services sector’s performance after the financial crisis has been as poor as its performance prior to the crisis was strong and stated that the growth of credit and deposits have been weak as both banks and households have sought to deleverage.
She said that these processes have largely run their course, and looking ahead, a neutral projection might think that the finance industry’s performance begins to move in lockstep with aggregate GDP and productivity in the rest of the UK economy. She added that relative to the past few years, this would mean a boost to productivity growth.