Chief economist of Bank of England Andrew Haldane admits errors in Brexit forecasting.
The Bank came under strong criticism for its role in so-called ‘Project Fear’ in the run-up to the European referendum, forecasting a dramatic economic slowdown if voters elected to leave the EU. However, this has not come to pass and the UK economy has bounced back since the referendum.
According to the Guardian, Haldane (pictured) said the Bank had not anticipated the resilience of consumer spending following the referendum and described the Bank’s economic forecasting models as “narrow and fragile”.
He added: “I am not someone who would say that all that has been done in the past is terrible. It is just that the models we had were rather narrow and fragile. The problem came when the world was tipped upside down and those models were ill-equipped to making sense of behaviours that were deeply irrational.”
Haldane suggested the misjudged forecasting had left the economic profession “in crisis”. The profession had previously been criticised for failing the spot the financial crisis in 2008 which led to the collapse of Lehman Brothers. It also faced criticism from Leave campaigner Michael Gove during the referendum who declared that the public had “had enough of experts”.
Haldane also hinted economists would now be re-examining their models: “It is a fair cop to say the profession is to some degree in crisis. It is not the first time it has happened. Out of this crisis, there could be a rebirth of economics.”
However, he maintained Brexit could still harm growth: “I think, near-term, the data – the evidence we have been accumulating since the referendum – has surprised to the upside. [There has been] greater resilience, in particular among consumers and among the housing market, than we had expected.
“Has that led us to fundamentally change our view on the fortunes of the economy looking forward over the next several years? Not really.”