Former MPC member doubts positive economic sentiment and urges the Bank of England to act

Oliver Gill
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Investiture At Buckingham Palace
Blanchflower was awarded a CBE in 2009 (Source: Getty)

Former interest rate-setter David Blanchflower has urged Mark Carney to act quickly to manage an economic downturn despite an increase in positive economic sentiment being reported.

"[The] time to act is now," said Blanchflower who served on the Monetary Policy Committee (MPC) between 2006 and 2009 and was renowned for championing a rate cut as early as October 2007.

Read more: Is ultra-loose monetary policy a danger to financial stability?

The Confederation of British Industry (CBI) became latest body to show optimism when it released data today suggesting the business output is set to surge in the final quarter of 2016. In addition, many businesses will at least welcome the certainty provided by Prime Minister Theresa May who confirmed this morning that she would invoke Article 50 by March next year at the latest.

But Blanchflower cast doubt over the positive vibes being reported.

"We will not have hard data for a year. [But] the data we have is comparable to that in 2008 showing a rapid decline in confidence," he told City A.M.

Although there is now a backstop date in place, he was also gloomy about the prospects for the economy in the wake of an exit from the EU.

"We have no idea what the government's Brexit plans are and there is much evidence that investment and employment are set to fall," he said.

Read more: Critics round on Carney as ultra-low interest rates to last 13 years

Blanchflower also said that a useful barometer of how foreign investors view Britain's Brexit plans can be seen from comments from car makers.

"Comments by the heads of Nissan and Toyota are instructive," he said.

Analysts predicted in June in the wake of the Brexit vote that there was a 75 per cent chance that Toyota will withdraw from the UK. Meanwhile on Thursday, Nissan boss Carlos Ghosn said that its Sunderland plant would ultimately lose competitiveness if Britain was forced to trade with the EU on World Trade Organisation terms.

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