Bank of England says UK resilient to financial shocks

LONDON — Britain's banking system remains strong and UK business has shown itself resilient to higher interest rates, the Bank of England (BoE) said on Tuesday in its latest assessment of the economy. 

Its conclusions follow a survey carried out by the BoE's Financial Policy Committee, in which respondents said the main risks to stability were cyber attacks along with geopolitical unrest and high inflation. 

"The outlook for global economic growth remains weak in the near-term. A number of risks could weaken growth further. For example, if inflation proves more persistent, interest rates may need to rise further," the BoE said.

"The UK banking system remains strong enough to support households and businesses, even if economic conditions are worse than we expect.

"The UK banking system has large capital buffers and other resources to absorb any potential losses, or outflows of cash," it added. 

Economists say Britain is at risk of tipping into recession after the BoE's multiple interest-rate rises since the end of 2021 aimed at cooling inflation, which remains elevated. 

The BoE cautioned that disruptions to market-based finance, such as equity and debt markets, "have the potential to increase the cost and reduce the availability of finance for both UK businesses and households".

The BoE's latest Systemic Risk Survey gathered responses from 56 firms in August and September.

It found that businesses "remain confident in the stability of the UK financial system and reported a similar level of confidence to" the results of the equivalent survey in the first half of 2023.

"The risk of cyber attack, geopolitical risk and inflation risk are still considered the most challenging for firms to manage by a significant margin. 

"A number of respondents flagged artificial intelligence as posing new risks to financial stability," the BoE found this time around.