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It'll take time to adjust to Brexit; The Bank of England reduced interest rates to a record low of 0.25%. Here Andrew Hebden, the bank's deputy agent in the North-east explains why.

WE are entering what is likely to be a period of significant change for our economy, with the vote to leave the European Union ushering in a new era for the UK's relationship with the rest of the world.

Some of the adjustments to this new reality may prove difficult and many will take time.

And, while the Bank of England firmly believes that the UK - one of the most flexible economies in the world - can handle this change, there will inevitably be a period of heightened uncertainty as this process takes place.

Last week, the Bank published its latest Inflation Report which explained how the vote to leave the EU has resulted in a material change in the economic outlook.

We expect the big fall in the value of sterling since the referendum will push up import and consumer prices notably over the next three years.

We also now expect growth to be weaker and unemployment higher over the next couple of years than at the time of our last forecast in May.

In response, the Bank's Monetary Policy Committee (MPC) has unveiled a comprehensive package of measures to support the economy.

The package includes a reduction in Bank Rate from 0.5% to 0.25% - the first change in interest rates for seven years - along with a new Term Funding Scheme, worth up to PS100bn, to ensure that this cut is passed on by lenders to households and businesses.

The Bank is also expanding its programme of purchases of government bonds by PS60bn and launching a new scheme to buy PS10bn of UK corporate bonds.

Taken together, these measures should provide a significant stimulus to economic activity, bolstering confidence and blunting the slowdown. And there is scope to extend them if circumstances require.

This package of measures should have a real beneficial impact for businesses and households here on Teesside. For example, cutting Bank Rate will immediately ease financing conditions as around half of mortgages by value are floating rate contracts and four-fifths of bank loans held by firms are at floating rates.

In the absence of much 'hard' data yet on the economic impact of the referendum, the evidence gathered by our regional Agents has been particularly important.

And we are really grateful for the time that business leaders have given us over the last few weeks as we've sought to better understand how they are being affected by this period of heightened uncertainty.

We also took questions from contacts on the Bank's latest measures to support the economy during a briefing in Stockton last week. And this morning my colleague Mauricio is attending a roundtable discussion with members of the Tees Valley Business Club.

Although some companies tell us that they have not changed their plans as a result of the referendum outcome, others are more cautious about decisions on investment and hiring.

Yesterday we published our latest Agents' Summary of Business Conditions featuring the findings of our survey on the impact of the EU referendum on our contacts - including many from here in the North-east.

The clear result was that the outcome would have a negative effect, overall, on capital spending, hiring and turnover over the coming year.

More positively, annual growth in manufacturing exports had turned positive after a period of declining output, helped by the recent depreciation in sterling. I know this is something that many North-east exporters are benefiting from.

At times like this, what is always striking is the resilience and versatility of the North-east's business community. As circumstances change, companies will adapt to take on new challenges - just as they have in the past.

THE Gazette's Invest in Teesside campaign is a call to action to promote existing business - and a rallying call for inward investment.

We want to tell the story of the potential of our business sectors.

We will look at people, skills apprenticeships and training.

And we are interested in all sectors - from transport to tourism, culture to commerce.

We will consistently make the case for companies and organisations to prioritise the region when making decisions about investment.

We will encourage businesses and organisations which are already based here to invest in their workforce to grow locally. This applies to all sectors, from manufacturing and digital development, to the health and education services which are valued so much by families.

We will also make the case about the attraction of Teesside to companies which are planning to launch or relocate.

And we will campaign for the politicians we elect to support growth in our region to enable us to play our part in creating a dynamic, varied and growing national economy.

Bank of England agent Andrew Hebden Governor of the Bank of England Mark Carney during his quarterly Inflation Report
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Publication:Evening Gazette (Middlesbrough, England)
Geographic Code:4EUUK
Date:Aug 11, 2016
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