Bank of England governor says UK economy is still facing 'headwinds'

The governor of the Bank of England has made a staunch defence of the institution's economic forecasts, saying the UK economy is still facing "headwinds" following the Brexit vote.

Mark Carney accepted business investment had held up better than the Bank predicted following the EU referendum, but said areas of the UK economy were still not firing at rates that were consistent with world economic growth of 4%.

While the UK economy has slowed since the Brexit vote, economic growth has defied expectations of a substantial slowdown and churned out a better-than-expected performance in the fourth quarter of 2017 at 0.5%.

Speaking to the House of Lords Economic Affairs Committee, Mr Carney sought to bat away criticisms that the Bank had been too pessimistic on the economy.

He said: "I think in a mature discussion of the effects of the referendum and the prospects for this economy during a period of transition, which is what this economy is under, we should recognise how the forces of adjustment are affecting the economy.

"Yes, it is good news that business investment was rounded to 2% with the most recent figures.

"But business investment is not up any way to the degree with a world economy growing at 4%, with the most supportive financial conditions in over a decade, with the strongest balance sheets in probably 25 years and huge opportunities of greater certainty.

"It is not growing to the extent at which it should. We estimate that it is four percentage points below what it otherwise would be.

"That is not based on us just estimating, but is based on discussions with 2,000 businesses up and down the country."

He added: "I think we all recognise that this year particularly that there is a period where there are some headwinds to this economy that we all want to see cleared."