Governor Mervyn King backs North’s export potential

Sep 24 2009 by Andrew Hebden, The Journal

“That rebalancing of the UK economy that I have been talking about for about 10 years, is very necessary. I think the fall in the exchange rate that we have seen will be helpful to that process but there’s no doubt that what we need to see now is a shift of resources into net exports - whether directly or in producing things that compete with imports that help to reduce the trade deficit so I wish The Journal well with its campaign.”

A survey published by the CBI said yesterday that, while growth is likely to pick up in the final quarter of this year, it will slip back again in the first part of 2010.

Mr King said: “How rapidly growth will pick up, whether it will be plus a little bit in one quarter, minus a bit in another; I don’t think is the big picture at all.

“What matters is that we have stabilised the very sharp fall and prevented what could have been a very, very nasty outcome by policy action around the world and I think the UK is pretty well set for a recovery but the banking sector is not in good shape and it will take a long time before the balance sheets of the banks are fully repaired and the ability to provide credit to the economy to finance expansion will be returned to normal.”

Mr King agreed with Lord Turner’s comments in his Mansion House speech on Tuesday night that change was needed in banking, but said the key challenge was in ensuring that bankers stopped taking reckless risks.

“(Lord Turner) was right. Radical change is needed in the banking sector. But I think rather than get into the business of asking questions about whether something is socially useful or not, or whether a particular activity should be encouraged, we should ask why was it that people took large risks?

“And one of the reasons was that they were taken by institutions that were guaranteed by taxpayers.

“So the fundamental question we have to ask is why is it that taxpayer guaranteed funding to banks is being used to finance risky transactions? You don’t have to make judgements about whether something is useful or not, you can recognise that it doesn’t make sense to provide guarantees for people to take big risks.”

Page 4 - Experts wary of a false dawn >>