UK economy could start to pick up, says Bank of England governor

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Britain's economy has the potential to start catching up with the rest of the world as the outcome of the Brexit negotiations becomes clearer, the governor of the Bank of England has said.

Mark Carney said there was the prospect of a "conscious recoupling" after seeing the international economy pull strongly ahead.

The UK, he said, was suffering from a short-term "Brexit effect" - with the economy expected to be down 2% at the end of 2018 compared with what had been expected before the time of the EU referendum in 2016.

However, he said firms which had been putting off investment decisions could start investing again as greater clarity emerges over the likely Brexit settlement.

"What is happening in the UK is effectively the Brexit effect in the short term. And I would underscore 'in the short term'," he told BBC Radio 4's Today programme.

"The world economy is accelerating and we haven't seen that yet. But there is the prospect this year, as there is greater clarity with the relationship with Europe and subsequently with the rest of the world, for a conscious recoupling of the UK economy with the global economy."

Mr Carney said the deeper the relationship with the EU after Brexit, the better it would be for the British economy.

"The deeper the relationship with Europe, the deeper the relationship with the rest of the world - and the two are obviously connected, it is a complicated set of negotiations - the better it is going to be over time for the UK economy," he said.

However, whatever the eventual outcome of the negotiations, he said the Bank had taken steps to ensure that the UK's financial sector was well-placed to cope.

"What we have been doing is to make sure that we are in a position as the UK, with this huge financial sector, that we can withstand any outcome and we can take advantage of any outcome," he said.

"The Government doesn't have to worry about the impact on the financial sector because it will be able to withstand and support the economy."