Bank chief: Our forecasts are just about as good as Michael Fish's (2024)

Economists have suffered a Michael Fish moment over the financial crisis and the impact of the Brexit vote, a top Bank of England official declared yesterday.

In a frank admission, the Bank’s chief economist Andy Haldane said his profession was ‘in crisis’ after bungling so many major calls in recent years.

He admitted that despite dire warnings of recession from the Bank and the Treasury, it had been ‘business as usual’ since the EU referendum, with households carrying on as if nothing had happened.

Mr Haldane, 49, compared economic forecasters to weathermen – in particular Mr Fish who in 1987 famously told the nation there would be no hurricane.

Just hours later the worst storm for 300 years battered the UK, claiming 20 lives, flattening 15 million trees and causing £1.5billion of damage.

‘Let’s go back to a different crisis, which is a crisis not in economic forecasting but in weather forecasting that resulted from the 1987 Great Storm,’ he said.

‘Michael Fish getting up, saying “someone’s just called me, hurricane coming. There’s no hurricane coming but it will be very windy in Spain”.

‘That’s very similar to the sort of reports central banks, naming no names, issued pre-crisis. There is no hurricane coming but it might be very windy in the sub-prime sector.’

Mr Haldane’s comments came as figures showed the economy grew by more than 1 per cent in the six months after the vote to leave the EU – adding to the deluge of upbeat data published since the Brexit vote.

In a boost to savers and pensioners with money tied up in the stock market, shares in London also closed at a record high for a sixth day running, a feat last achieved in 1997.

The FTSE 100 index edged 5.57 points higher to 7195.31 – taking gains since the referendum to 13.5 per cent or £216billion.

Mr Haldane, a key lieutenant of Governor Mark Carney, conceded that the Bank was too gloomy following the EU vote.

‘Fair cop, we had foreseen a sharper slowdown in the economy than has happened,’ he said. ‘If you look at how the British consumer performed during the course of last year, it is almost as though the referendum had not taken place.

‘In terms of many of the real things like pay and jobs, it’s pretty much business as usual.’

Conceding the Bank was too gloomy about the impact of Brexit, Mr Haldane said: ‘The profession is to some degree in crisis.’ He added: ‘If an economist ever tells you they are certain about anything, that is the time to worry.’

Fresh figures yesterday showed the economy grew by 0.5 per cent in the final quarter of 2016, having expanded by 0.6 per cent in the previous three months.

That means output is now 1.1 per cent higher than it was at the time of the EU referendum in June, according to the report by research group IHS Markit.

The Treasury had warned that a punishing recession would see the economy slump by as much as 1.4 per cent in the six months after a Brexit vote.

But IHS Markit’s index of activity – where scores above 50 show growth – rose to a 17-month high of 56.4 in December.

Manufacturing activity reached a 30-month high while services firms enjoyed their best month since July 2015 and builders recorded their strongest performance for nine months. Separate figures yesterday showed sales of new cars hit a record high of 2.69million last year.

‘The UK economy ended 2016 on a high,’ said Chris Williamson, chief business economist at IHS Markit. ‘The UK economy continues to defy widely held expectations of a Brexit-driven slowdown.’

John Longworth, co-chairman of Leave Means Leave, said: ‘The New Year has brought an avalanche of upbeat data which demonstrates the continuing strength of the UK economy and confounds the predictions of the referendum doom-mongers.’

Mr Haldane said that although the Bank was wrong about the immediate impact of the Brexit vote, he still expected the economy to slow this year.

‘I think near-term the data has surprised to the upside – greater resilience, in particular among consumers and among the housing market, than we had expected. Has that led us to change our view on the fortunes of the economy looking forward over the next several years? Not really.

‘We are still expecting a slowing, not a huge slowing, but nonetheless a material slowing, during the course of next year as the effects of higher prices in the shops begin to chew away a little at the spending power of consumers.’