A day after it was confirmed interest rates would remain unchanged, the governor of the Bank of England was touring Kent’s gateways to Europe and getting an insight to what many fear will usher in a winter of discontent at our ports.
Andrew Bailey – now four years into his eight year term – admitted to KentOnline these regular trips around the country are among the “highlights” of his job.
They are certainly something of a precious break from the pressures of head of the bank tasked with maintaining the nation’s financial and monetary stability during recent years of intense turmoil.
Not that visiting the likes of Eurotunnel and the Port of Dover offers much more than a warning of potential headaches to come for one of the country’s key trade routes.
Both are bracing themselves for the introduction later this year of the new post-Brexit Entry/Exit System (EES). It will require all non-EU citizens – which includes those of us in Britain – having to provide biometric details when crossing the French borders based at Kent’s ports. A situation reliant on technology reducing the inevitable delays and which, according to Toby Howe, tactical lead for the Kent Resilience Forum, could prove a “nightmare waiting to happen”.
“Both Eurotunnel and the harbour board have done a huge amount of work to prepare,” said Andrew Bailey, speaking to KentOnline in the boardroom at the Port of Dover, “so one thing I can say is there’s no shortage of application to make it happen.
“They’re working to [it starting in] November but they don’t have a definite date, so there’s a little uncertainty there. But they’re full-steam ahead.
“Both stressed how much traffic they handle every day and how they manage that traffic, so they’re both very focused on how they manage that with the new systems.”
The date currently earmarked for its introduction, but remains subject to change, is November 10 – a date unlikely to see it swamped by holidaymakers or day-trippers. But the traditional Christmas rush will be just weeks away.
Geographical constraints in Dover mean it has not been possible to create a new registration facility in the same way as has been delivered by its cross-Channel rival. Although coach traffic will be able to be processed at the port’s Western Docks, passengers travelling in cars will need to be enrolled on the approach to the border at the Eastern Docks. Which, many fear, will once again mean queues on the approach during peak periods.
It is just the latest by-product of Brexit. Its new regulations and red-tape has already seen many Kent firms bring to an end exporting into mainland Europe.
“I’m a public official,” says the governor, “so I don’t take a position on Brexit per se. I have to say if you ask me about the economics of Brexit what I say is what you would expect, and what we have seen, there will be some short-term painful effect on trade.
“But over a longer period of time the compensation for that is that trade will be redirected. But it can be particular impactful on small businesses and for some of them that’s just not viable.”
It could be argued in every direction the nation’s economy faces challenges – and his visit to Dover saw him briefed on an upcoming one.
He’d already had a busy week. On Thursday, the bank’s monetary policy committee – on which he is one of the nine-strong members – had voted for no change in the current interest rate of 5%.
The government tasks the bank to keep inflation – the rate at which the prices of goods and services increase year-on-year – at 2%.
And, as we all know, that spiralled somewhat out of control as a result of a number of key factors – peaking at 11.1% in October 2022.
The bank’s main weapon to help temper inflation is the interest rate. When it soars it’s great news for savers – but equally as painful to those with a mortgage or those taking out loans.
On the day we speak, the decision to hold interest rates prompted a poll on one national newspaper’s website asking its visitors whether he should resign as a result of interest rates remaining so high (67% say he should).
And in April, Liz Truss – that fleeting Prime Minister – said he should resign over his role in her disasterous Budget which caused such a seismic shock to the economic that it forced a flurry of interest rates hikes. Few, in truth, would argue he was a key architect of that calamity.
The rate rose from 1.75% in the month before her doomed Budget in September 2022 to 5.25% less than a year later. For those on a mortgage tied to interest rates, the increase was dramatic – adding hundreds of pounds onto monthly repayments.
“I’ve never actually met Liz Truss,” the governor explains, “so I don’t know her personally.
“But I think it’s part of being in public life that you have to accept there will be plenty of comments. My view is that it’s not a moment to get angry or exasperated, we know what our job is.”
And the rollercoaster ride of interest rates has defined much of the economic outlook over recent years.
From the financial crisis of 2008, interest rates started to tumble. By the time Covid saw us all lockdown, it was at an historic low of 0.1%.
But the twin impact of factories pausing production, globally, as a result of the pandemic before slowly restarting, and then compounded by Russia’s February 2022 invasion of Ukraine (sending grain and energy prices soaring), saw prices – and inflation – start to rocket.
If interest rates go up, the thinking goes, our mortgages are hiked and the appeal of saving our money increases – thus the resulting squeeze in our spending should lower demand for goods and services and prices level out. But when energy prices hit a peak, it did little to ease the financial crisis faced by many. In fact, it only compounded it.
“Inflation has come down a long way,” the 65-year-old explains. “We still have to get it sustainably at the target and we have quite an unbalanced mix of components of inflation at the moment. But I’m very encouraged that the path is downwards therefore I do think the path for interest rates will be downwards, gradually.”
He is quick to caveat the prediction on there being no other significant shocks to the economy. But anyone hoping it may return to those historic lows may be disappointed.
“Where it will settle is a good question. Simple answer is I can’t tell you with any great accuracy. What I would say is ‘will we go back to the very low near zero interest rates that we had until not that long ago’?
“My answer is I would not expect that because what caused interest rates to go that way it was, amongst other things, two very big shocks to the economy.
“It all started with the financial crisis then Covid was another big shock.
For interest rates to go back down to those levels, you’d have to have very big shocks. Of course, you don’t want very big shocks to happen
“To go back down to those levels, you’d have to have very big shocks. Of course, you don’t want very big shocks to happen.
“That’s one way of saying my best guess will be it settles at a neutral rate – quite what that will be depends on a lot of things – but I expect rates to come down.”
Certainly, for a man who took over the reins at the bank in December 2019 – just before Covid hit – he’s overseen a hugely turbulent period globally and domestically.
He concludes: “I’m just over half way through my eight year term so I do say to people I do hope the second half will be quieter than the first half – but the bar’s quite low for that one.”