Coronavirus: Carney warns economic shock 'could prove large'
The Bank of England governor told MPs that, unlike in 2008, the economy was likely to see "disruption not destruction".
Tuesday 3 March 2020 16:34, UK
Mark Carney has said the Bank of England will take steps to help the UK through a coronavirus economic shock "that could prove large".
Mr Carney told MPs that the Bank's interest rate setting committee was "considering the policy implications of various possible scenarios" that could arise from the outbreak of the coronavirus.
He added that officials around the world were working on a "powerful and timely" response.
But he said the persistence of the economic hit should be different to that of the "lasting scarring" caused by the financial crisis in 2008 - with the virus likely to cause "disruption not destruction".
Mr Carney added that the Bank was currently in the process of changing its assessment for the UK economic outlook - having only recently cut its forecast for UK GDP growth in 2020 to 0.8%.
The comments come a day after the OECD warned that COVID-19 posed the gravest threat to the global economy since the financial crisis and, if not contained, could plunge many countries in Europe - including the UK - into recession.
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Hours after the governor's remarks the US Federal Reserve cut interest rates by half a percentage point citing "evolving risks" to the country's economy.
The G7 group of major of economies pledged to use "all appropriate tools" to deal with the economic impact of the outbreak but announced no new immediate action as stock markets remained volatile.
Last week, Mr Carney told Sky News that Britain should prepare itself for an economic growth downgrade as a result of the spread of the virus.
On Tuesday, he told MPs on the Commons Treasury select committee that the Bank's role "is to help UK businesses and households manage through an economic shock that could prove large but will ultimately be temporary".
Mr Carney added: "The Bank will take all necessary steps to support the UK economy and financial system, consistent with its statutory responsibilities.
"We are monitoring the situation closely across all our functions and ensuring all necessary contingency plans are in place."
He said the Bank's main committees had met jointly on Monday to assess potential scenarios.
Officials have been considering how damage to supply chains could have knock-on consequences on the financial system and how they might deal with "possible constraints" on financing to UK businesses and households.
They have also looked at the contingency plans of banks, insurers and the financial market infrastructure - including how they might continue to operate with teams split over different sites and some employees working from home.
Mr Carney added that he was in contact with Andrew Bailey, who will succeed him as governor later this month.
He added that he has had a "series of discussions" with the chancellor, Rishi Sunak, while the Bank is also in "frequent contact" with the G7 and G20 organisations, as well as the International Monetary Fund.
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Airlines have been among the stocks worst hit by investor concerns about the impact of COVID-19.
Ryanair, easyJet and BA-owner IAG have cut some services and outlined hopes of only a short-term impact.
Ryanair boss Michael O'Leary used an interview with Sky News to appeal for a calm approach.
A raft of other companies provided updates on the impact of the virus on Tuesday.
Insurer Direct Line said it was already facing a £1m bill for travel claims while disruption to markets could affect the speed of claims payouts.
Global recruitment firm Robert Walters warned the outbreak was likely to hit its 2020 profits while even bakery chain Greggs said the virus had created uncertainty over its outlook for the year.
However the market chaos prompted by the outbreak has proved a boon for CMC Markets, the financial spread-betting firm run by former Conservative treasurer Peter Cruddas.
It said that this had led to "heightened trading activity" likely to result in better than expected annual profits.
Virus Outbreak: Global Emergency - Watch a special Sky News programme on coronavirus at 6pm weekdays