14th Jul 2026 13:19
(Alliance News) - Low economic growth is a "big issue" for the UK, the Bank of England's head has said in a message to Andy Burnham's incoming government, as he also raised concerns that renewed tensions in the Middle East could impact financial stability.
Andrew Bailey's remarks come as Burnham is now guaranteed to be the successor of Keir Starmer when he leaves No 10 next week.
It also coincides with heightened hostilities in Iran which sent oil prices back up to a monthly high on Tuesday.
The central bank governor told MPs on the Treasury Committee: "The overall message I would give is that I think the big issue is growth in the economy.
"I do actually think that there are signs of a very resilient financial system. What I think is much more challenging is we've had low growth in the economy now for the best part of 16 to 17 years.
"So this is not a story about any one government… but I think it's important because it is a critical structural issue."
He stressed: "We will not get growth if we don't have financial stability," when asked whether regulation in the financial system may be restricting growth.
Bailey said he feels risks to financial stability in the UK had increased further in recent weeks due to a "fragile" ceasefire and "instability" that had come about in the US-Israeli war with Iran.
"I don't think I feel qualified to judge how long this will go on for in terms of this resumption of hostilities and how it's going to end," he told MPs.
"But it underlines that is going to be an unstable process for the foreseeable future."
He pointed out that energy prices had come down since peaking in April and there remained "fairly soft evidence of the pass-through into UK prices".
He added: "The one caveat I would add, which I don't think gets enough coverage, is although crude oil prices come down, the prices of refined products have not come down as much.
"So we're talking about things like gasoline and diesel at this point, which of course are the end products, so those are the things that matter."
Further US and Iran attacks have spooked investors and traders in the financial markets and heightened fears the war could fully resume since an interim peace deal was signed last month.
The price of Brent crude oil shot up by more than 4% on Tuesday to around USD87 per barrel – the highest level in a month.
UK long-term borrowing costs also lifted higher on market concerns over what the Iran war flare-up could mean for inflation and interest rates.
Yields on 30-year gilts lifted to a two-month high of around 5.73% on Tuesday.
Bailey said: "As the last few days have demonstrated, the big driver of moves in the financial markets is actually not what happens in the UK – it's the global setting."
By Anna Wise, Press Association Business Reporter
Press Association: Finance
source: PA
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