Seven years after the financial crisis, the Bank of England has cut interest rates to a record low of 0.25% and launched a new £70bn round of quantitative easing.
These new purchases will be added to the £375bn worth of assets the Bank of England purchased between 2009 and 2012. While these numbers are staggering, it’s not clear whether QE has been a success. One criticism levelled at QE is while it has pushed up the prices of financial assets and property, it hasn’t done much to stimulate the real economy. GDP growth remains weak, and inflation is low.
June’s Brexit vote raised fears of a recession. One area of particular concern is construction and infrastructure spending. Figures from consultancy group Barbour ABI showed that new construction orders fell by 20% to £5.8bn in July.
The collapse of the controversial Hinkley Point nuclear project is one example of where spending may stall. But it’s also possible that the government will decide to switch its focus from QE to a more Keynesian type of stimulus — infrastructure spending.
Post-Brexit, Prime Minister Theresa May has committed to make infrastructure investment a priority. There is a growing expectation that this autumn’s budget will mark the end of…
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