The UK government may need to borrow £50bn more than planned to support the country’s post-Brexit economy, says HSBC.
Despite the UK’s worrying long-term debt dynamics, investment in infrastructure would be the best response to falling growth, says the new report by economists Simon Wells and Liz Martins, cited by the FT.
The HSBC report anticipates a “sharp slowdown” in growth in 2017, but believes the UK will stop short of falling into a full recession.
The report says the UK has underinvested in infrastructure in recent years, providing ample opportunities to invest.
However, it says BANANAism – Build Absolutely Nothing Anywhere Near Anyone, a play on Nimbyism – will be one of the biggest barriers to implementing such investment.
Bank of England governor Mark Carney warned the UK government earlier this month that it should not rely on monetary policy alone to stimulate the UK’s economy following the country’s vote to leave the European Union.
The Bank of America Merrill Lynch forecasts the rise in populist politics, including Brexit and the rise of Donald Trump, will prompt the policy baton to pass from monetary to fiscal stimulus between 2016 and 2017.