Andy Haldane said it is ‘a thoroughly good thing’ that the economy is doing well (Picture: Getty Images)
The Bank of England has admitted its Brexit forecasting may have been a ‘Michael Fish moment’.
Before the vote last June, the BofE had warned of a swift and deep economic downturn should the UK vote to leave the EU.
But Andy Haldane, the BofE’s chief economist, has now said his team face having to predict how the British economy will hold up despite the ‘unknowable’ outcome of the government’s Brexit negotiations.
Speaking at an event organised by the Institute for Government, Haldane said the performance of the economy since the referendum had been a ‘surprise’ and admitted several forecasts in recent years had been missed.
‘It is fair cop to say the profession is, to some degree, in crisis,’ he said, referring to failures in economic forecasting from the Great Depression in the 1930s to the Great Recession in 2008, when warnings were not heeded.
Andy Haldane is the BofE’s chief economist (Picture: PA)
He compared the crisis to an infamous 1987 weather forecast by BBC meteorologist Micahel Fish, in which he wrongly claimed a hurricane would not hit Britain.
Hours after denying there was a hurricane on the way – ‘but it will be very windy in Spain’ – there was devastation across the country which claimed 18 lives.
Asked why the BofE had forecast a ‘hurricane’ for the economy that did not materialise, Haldane replied: ‘It’s been very windy in Spain.’
He continued: ‘It is true and again, fair cop. We had foreseen a sharper slowdown in the economy than has happened – in common with every other, almost every other, mainstream macro forecaster.’
Calling the surprising resilience of the economy ‘a thoroughly good thing’, Haldane attributed it to consumer spending and the housing market.
There is still ‘genuine uncertainty’ around what Brexit will bring (Picture: Getty Images)
However, he warned that ‘this year might be a somewhat more difficult year for the consumer than was last year’.
There is still a ‘genuine uncertainty’ around how the economy will fare once the UK actually leaves the EU, because it depends so much on the outcome of negotiations with Brussels – which, for now, are shrouded in mystery.
‘The precise outcome of that right now is not just unknown, but unknowable,’ Haldane added. ‘Not just to economic forecasters but to everyone.’
Once Article 50 of the Lisbon Treaty is triggered, the UK has a two year window in which to secure a deal with the EU.
In preparation, the BofE has drawn up different models based on whether the UK manages to strike a trade deal with the EU, or if the country has to fall back on World Trade Organisation rules.
‘As things stand, that’s as good as you will do given the cloud of uncertainty that exists and will continue to exist for some time to come,’ Haldane said.