Elsewhere in London, a crucial meeting to decide the future of Yorkshire fertiliser miner Sirius Minerals is getting underway.
Sirius wants shareholders to approve a rescue deal from Anglo American which values the firm at £405m, or just 5.5p per share.
Sirius had hoped to dig the UK’s first deep mine in 40 years under the North York Moors. But it was plunged into financial troubles last autumn when it was forced to cancel a £400m bond sales, blaming a lack of government support and Brexit uncertainty.
If the deal is rejected, then Sirius could collapse into administration. But many of the company’s army of small investors, based in North Yorkshire, vote the deal down – unhappy that Anglo is trying to take the business on the cheap.
My colleague Rob Davies is there, and reports:
Back in parliament, Labour MP Alison McGovern asks Mark Carney whether the Bank actually has enough firepower to fight a coronavirus downturn.
With interest rates at just 0.75%, and £475bn of quantitative easing already conducted – there’s not much left, is there?
“We have effectively 200 to 250 basis points of space”, governor Carney shoots back.
“How’s that?”, he asks, like a Western gunslinger twirling his six-shooter.
That’s 75 basis points of conventional action (ie, interest rate could fall to 0%), plus fresh unconventional moves such as QE.
Deputy governor Dave Ramsden adds that you get ‘more bang for your buck’ if such stimulus comes as part of a package, and is coordinated internationally.
Carney comments drive markets higher
Shares are pushing higher in London, as the markets recover some of last week’s heavy losses.
Traders are welcoming the Bank of England’s pledge to take “all necessary steps” to protect Britain from the economic shock of coronavirus.
Shares in medium-sized UK firms are leading the way, with the FTSE 250 index up over 3%.
The larger FTSE 100 index (which contains more multinationals) is up 2.2% or 147 points at 6802. Consumer-focused firms are up 3%, followed by miners (+2.9%), energy companies (2.8%) and tech firms (+2.6%).
Conservative MP Felicity Buchan asks Mark Carney if the Bank of England could cut interest rates before its next scheduled meeting (on Thursday 26 March).
Carney takes a couple of moments to gather his thoughts, before making two points:
- The MPC has “always acted in a timely way”, once it has gathered the necessary information and conducted its analysis.
- The transition to a new governor on March 16 will have no impact on the conduct of Bank’s operations as Carney is in regular contact with Andrew Bailey.
The committee would make a decision at the appropriate time and not before.
Angela Eagle MP asks Mark Carney about the impact of coronavirus on the labour market — including gig economy staff who only get paid if they work.
Carney replies this is indeed an issue – but one where fiscal tools (government spending) work better than monetary ones.
Sensing he is drifting beyond his remit, Carney adds smartly:
I don’t want to lead the government, but these are considerations we all need to take into account.
Deputy governor Sir Dave Ramsden, weighs in too – saying the Bank is now reassessing its January economic forecasts (which predicted a rise in global growth).
Ramsden adds that the Bank could launch “additional liquidity measures” to help the economy ride out the temporary shock of the coronavirus.
Carney: Bank audio hack ‘whollly unacceptable’
The Treasury Committee are also probing Mark Carney over the recent revelations that some traders gained early, unauthorised access to the audio feed from its press conferences.
Carney says that it is a “wholly unacceptable situation” that anyone should have used the Bank’s backup audio feed in this way (as was revealed in December).
He explains that that Bank disabled the feed once this issue came to light, and have terminated the 3rd party supplier involved. Both this supplier, and the traders who received this information, have been referred to the FCA who are now investigating.
Carney adds that the Bank is conducting an internal review into what went wrong – a report is expected by April.
On Sunday, my colleague Jasper Jolly revealed that the Bank had carried out due diligence three times on technology supplier Encoded Media, but only revoked its access in December.
Under questioning from MPs, Mark Carney adds that he expects a “powerful and timely” global economic response to the coronavirus.
He say the Bank doesn’t want “viable businesses” to collapse because of the impact of Covid-19.
So there are “things we can do” to help commercial banks to use their balance sheets to support customers, he explains. That could provide vital working capital to help bosses manage their way through “a difficult but ultimately temporary” situation, the governor explains.
Carney: Bank committees will meet regularly on coronavirus
Mark Carney then outlines to MPs how the Bank’s various committees are taking action to protect the UK from the coronavirus.
- The Monetary Policy Committee, which sets interest rates, is looking at the impact which supply disruptions will have on economic demand. That includes issues like “cash flow, the cost and availability of finance as well as confidence effects”.
- The Financial Policy Committee, which manages financial risks, is looking at whether there could be “spillover effects”, including whether UK households and banks could struggle to get financing.
- The Prudential Regulation Committee, which oversees the City, is examining the contingency plans of banks and insurers to see if they are ready for disruption, and can serve customers through split teams and remote working if needed.
The Bank’s own management is reviewing its own operations, to ensure that Britain’s payment systems and money market remain operational.
These three committees met yesterday to discuss the situation, and will keep meeting for as long as appropriate, Carney says – adding that he’s in regular contact with international peers, the Treasury, and his successor Andrew Bailey.
Mark Carney: Coronavirus could be a large, but temporary, shock
Newsflash: Bank of England governor Mark Carney has warned MPs that the coronavirus could be a “large” but “temporary” economic shock.
Appealing at the Treasury committee at parliament, Carney insist that the BoE is taking action to protect the economy too.
He tells MPs that the front line of combating Covid-19 are the “extraordinary efforts” of the NHS staff, public health officials, carers and volunteers across the UK.
He also cites the “exceptional support” provided by the Foreign and Commonwealth office to UK citizens abroad, explaining:
The Bank of England’s role is to help UK businesses and households manage through an economic shock which could prove large, but which will ultimately be temporary.
The Bank will take “all necessary steps to support the UK economy and financial system, consistent with its statutory responsibilities”, Carney pledges, adding:
We’re monitoring the situation closely across all our functions and ensuring all necessary contingency plans are in place.
More to follow…..
UK builders return to growth
In an encouraging sign, Britain’s construction sector has returned to growth for the first time in nearly a year.
Output jumped in February, at its fastest rate since December 2018, according to data firm Markit.
UK construction companies signalled a return to business activity growth during February, following a nine-month period of declining workloads. The latest survey also pointed to the sharpest rise in new orders since December 2015. Anecdotal evidence mainly linked the recovery to a post- election improvement in business confidence and pent-up demand for new projects.
This has lifted Markit’s construction PMI, which tracks activity in the sector, up to 52.6 in February, up from 48.4 in January. That’s the first reading over 50 (which shows growth) since April last year.
France’s finance minister, Bruno Le Maire, has tweeted that he held a “very positive” phone call with ECB chief Christine Lagarde today.
Le Maire adds:
“We want a strong and coordinated answer at euro zone and G7.”
Analyst John Kemp has spotted that investor are expecting sharp cuts in US interest rates over the next two months – which would please Donald Trump.