Paul Tucker: Uncertainty, the implementation of monetary policy, and the
management of risk
Speech by Mr Paul Tucker, Executive Director and Member of the Monetary Policy Committee of the
Bank of England, at the Association of Corporate Treasurers, Newport, 19 May 2006.
* * *
Many of us would probably say that we do not much like uncertainty, whether at work or home. But we
cannot escape it, and it provides opportunities. Rather, we want to be compensated for the risk, or to
mitigate it, or both.
What I think we actively dislike is avoidable uncertainty. And from the point of view of society, we
should dislike uncertainties that are both avoidable and especially costly to mitigate for those who bear
the consequent risks.
I am going to discuss some sources of avoidable uncertainty - or volatility - that have affected you as
corporate treasurers. And I will discuss some unavoidable sources of uncertainty, and what they might
mean for risk management, at the level of firms and of the financial system as a whole.
Avoidable uncertainties: the monetary regime, and the implementation of monetary policy
For too many years in the UK, we lived with a large but avoidable element of macroeconomic
uncertainty. It was unclear what rate of inflation households and businesses should expect to prevail
over the medium-to-long run. In other words, it was unclear what policymakers were trying to achieve;
whether their goals shifted about; and whether policy makers would succeed in delivering those goals.
That was resolved progressively during the 1990s, culminating in the Government's announcement in
1997 that an operationally independent Bank of England was charged with achieving a clear inflation
target. A stable monetary environment has reduced the quite unnecessary risk of self-induced 'boom
and bust' flipping about demand conditions across the economy as whole.
For users of financial markets, the most visible sign of the change was the reduction in yields on
conventional government bonds with long maturities, which had previously compensated for high and
highly uncertain prospective inflation rates. By ushering in a world with a credible nominal anchor, one
source of uncertainty and risk was significantly reduced. The ex post annualised volatility of ten year
gilt yields has halved: from over 200 basis points between 1970 and 1997, to under 100 basis points
since the current monetary regime was introduced (Table 1).
That means that, as corporate treasurers, one source of unavoidable uncertainty about your long-run
borrowing costs has been very significantly reduced.
The introduction of the new monetary regime did not, and of course could not, remove uncertainty
about the quarter-to-quarter, or indeed year-to-year, path of the economy and inflation. And so there
remains a degree of unavoidable uncertainty about the short-term path of official rates, as the
Monetary Policy Committee responds to cyclical developments. Transparency can reduce that
uncertainty, through our making clear what we think is going on in the economy and how, generally,
we react to changes in the outlook. We do that through the minutes of our monthly meetings and the
quarterly Inflation Report; and, in terms of our individual analyses, through speeches, etc. But, like
anybody else, we cannot predict with certainty what will happen in the economy. There are always
material risks around the central outlook. We have to weigh those risks in our policy decisions in much
the same way as you do in your business and financing decisions.
In the midst of all this unavoidable uncertainty, however, a few things are not in doubt. The MPC's
official interest rate is certain. So there should be no uncertainty about the general level of overnight
rates in the money markets. In fact, though, overnight rates in the UK have historically been highly
volatile. Various steps taken over the past decade or so moderated that volatility - with some success;
it has for some while been much lower than in the mid-1990s (Chart 1). But it has remained greater -
from day to day, and during the day - than overnight rates in dollars, euros etc (Charts 2 and 3).
That has created uncertainty for users of the sterling money markets - banks, asset managers and, of
course, corporate treasurers. Avoidable uncertainty.
It is the Bank of England's responsibility to remove that uncertainty as much as we possibly can. And
yesterday, after more than three years' preparation and extensive collaboration with market
participants, we introduced a completely modernised system to do just that.
It provides a new framework for the Bank's implementation of monetary policy; our operational
engagement with the banking system; and for the sterling money markets.
I shall spare you the details, but I do want to sketch the main features of the system, by way of
underlining that it is directly relevant to you as corporate treasurers. I am keen that you should hear
this directly from the Bank.
For as long as anyone can remember, a small group of clearing banks - which these days we call
'settlement banks' - have had to balance their books with the Bank at the close of business each
evening. Volatility resulted if the Bank had not provided pretty well exactly the amount of liquidity the
banking system as a whole needed each day; or if our money was not distributed in the money
markets to those banks that were short. And traders would speculate on that volatility - perhaps a rare
instance of financial market activity with little social utility.
The new system relaxes the overnight constraint and liberalises access to the Bank. A broader group
of banks - initially just over 40, accounting for around 90% of the UK banking system's sterling
liabilities - will maintain a target balance with the Bank on average over each month. (In the first
maintenance period, which started yesterday, the target is just under £23bn.) These reserve-scheme
banks, and other banks who so choose, also have access to a standing deposit facility and a standing
(secured) lending facility. At a modest penalty to the Bank's policy rate, they can use those facilities in
unlimited amounts, and so can turn to them if the rate in the market threatens to be less attractive.
Together, this should keep the market rate in line with our policy rate.
Indeed, our objectives have been fourfold. First, to stabilise overnight market rates in line with the
MPC rate. Second, to improve the efficiency of the framework for banking system liquidity
management in normal conditions, and to make it more resilient in stressed conditions. Third, to
simplify our method of implementing monetary policy. And fourth, to foster efficient and fair markets.
For too long, too many people have been deterred from using the short-term sterling markets as much
as they might because it seemed to required special expertise, and therefore a disproportionate
commitment of resources.
Judging by the ACT's very positive response to one of the Bank's early consultation papers, the
modernisation of our framework should be helpful to companies, which of course use the money
markets to borrow, employ cash balances, and manage risk.
At the end of last year, firms' short-term sterling borrowing in the UK was around £300 bn. There are
no data on how much of that was at very short maturities, but there is anecdotal evidence of overnight
volatility acting as a deterrent. For example, when in late 2004 the Bank announced our intention to
introduce reforms, the European treasury department of one of the largest companies in the world
wrote to me in the following terms:
"I write to express our support and appreciation ..... The excessive volatility in the
overnight market precluded high-quality issuers .. from participating. ...The steps
you are taking will surely increase the depth, stability and overall liquidity of the
sterling money market."
That kind of support has been a great encouragement.
In terms of risk management, many companies swap fixed-rate term borrowing (and other cash flows)
into floating-rate. This can be into a six or three-month LIBOR rate of interest, or into a stream of
payments linked to the overnight money market rate. In the UK, the Overnight-Index-Swap market has
developed rather less than its counterpart in the euro area, which is used by large non-financial
companies. One obstacle seems to have been the intra-day volatility in the sterling market, which has
entailed uncertainty about the spread between the average overnight rate on any particular day (as
measured by the Sterling Overnight Rate Index Average, or SONIA) and the rate actually paid on
overnight cash at different times during the day. Many market participants believe that if the reforms
introduced yesterday significantly reduce intra-day volatility, the sterling OIS swap market will grow,
making it a more useful risk management tool.
The evidence of corporate treasurers as placers of short-term money is more concrete. For a few
years now, UK companies' domestic operations have been producing surplus cash flows: £12bn, or
about 1% of GDP, in 2005. The counterpart has, of course, been an accumulation of financial assets.
A lot of that has gone in to the money markets - in particular, holdings of call-deposits with banks
(Chart 4) and investments in money market funds. In placing that liquidity, you should be in a position
where you need to negotiate only the spread paid relative to a stable money market rate, not the
underlying rate itself. Our overhaul of the system should deliver that.
By taking the noise out of the sterling money markets, we aim to achieve greater stability and greater
transparency. That won't revolutionise your businesses, but I trust that it will bring a welcome
reduction in the avoidable uncertainties you confront.
Business risk management and pension-scheme uncertainties
At an aggregate level, the recent financial management of the company sector has, in fact, posed
some puzzles about your assessment of uncertainty and risk. This has been important to our
understanding of what is going on in the money markets, and indeed financial markets more generally,
as part of the backdrop to our role of promoting monetary and financial stability.
The surplus cash flows I described earlier, in the context of your treasury management, are a product
of UK cash profits having exceeded, by some margin, business investment (Chart 5).
The same is true across the G7 economies as a whole. Companies have acted to repair balance
sheets following the excesses of the late 1990s, and may conceivably have built a cushion of financial
assets to support them through a period of uncertainty as they adjust to the new competitive forces
associated with globalisation. But the UK corporate sector stands out as having employed its surplus
in 'cash' to a far greater extent than its G7 peers (Chart 6).
The IMF hypothesise1 that this may have been motivated by a desire to accumulate a precautionary
pot of liquid savings for managing pension fund deficits. I do not know whether or not that is so. For
example, the build up of deposits has been concentrated in a few sectors: real estate, and business
services, and it is not obvious that these sectors have big pension fund deficits (Chart 7).
But that pensions have been a material component in firms' cash management is not in doubt. That is
apparent in the share of gross corporate savings accounted for by employers' contributions to pension
funds (Chart 8). Contributions have tripled - or in real terms doubled - since the late 1990s (Chart 9)2.
Part of this reflects 'special' or 'one-off' contributions to reduce deficits. But, judging by
selfadministered schemes3, regular contributions have doubled (Chart 10). What is going on here?
Well, it might have something to do with your management of risk, bearing in mind avoidable and
unavoidable sources of uncertainty.
A corporate sponsor of a defined-benefit pension scheme is, in effect, providing a guarantee or,
broadly, writing a very complex option4: one on which the present value of the payoffs is related to,
amongst other things, the future growth in earnings of its workforce, their longevity, and the yield on an
equivalent-maturity risk-free bond. Apart from the design of the scheme itself and the associated
balance of wages and pensions in employee remuneration, the sponsor makes two big choices: the
level of contributions it makes to the fund, and the asset allocation of the fund. (It may seem odd to
say that the sponsor makes a decision about fund asset allocation, because of course that is formally
the responsibility of trustees. But as guarantors, those decisions affect the risk run by sponsors who, in
principle, could make adjustments to their own balance sheet if they regarded trustee choices as
suboptimal.)
Past increases in life expectancy entail higher contributions and, other things being equal, add to the
marginal cost of a firm's labour force. An unavoidable source of uncertainty is future developments in
longevity.
In the asset allocation of a fund, company sponsors face, at one remove, a trade-off. On the one hand,
if a fund holds risky assets, it will earn a risk premium but its value will tend to be more volatile, varying
with the long-term risk-free rate used to discount its liabilities and the value of its risky assets. On the
other hand, a fund could choose to hold only risk-free assets matching the characteristics of the
scheme's liabilities; for example, buying annuities which can hedge the duration and longevity risk in
known pension liabilities. In that case, the fund's expected returns will be lower, and so sponsor
contributions will have to be higher in order for the fund to meet the scheme's future obligations.
In short, company sponsors face some sources of avoidable uncertainty about the future value of their
pension funds, with the level of their contributions akin to a premium paid to reduce or remove that
uncertainty. (The funds' trustees face a subtly different risk trade off, in which they need to weigh the
correlation of the risks in the asset-liability mix of their fund with the risks to the sponsor's business
and net worth, and so to its capability to meet any future fund shortfall.)
How much risk a company should take in its core business and in the provision of pensions is
obviously a matter for its board. A famous paper in corporate finance5 finds that, subject to some
(admittedly fairly strong) assumptions about tax etc, the market value of a company (measured as the
sum of the value of all its financial liabilities, equity and debt) should not depend on its capital
structure. Rather, its capital structure affects the risk to equity holders, and so the headline return they
should rationally require to compensate for risk. Within this framework, defined-benefit pension
schemes can be viewed as deferred compensation and so as entailing a form of indebtedness (in
many cases, de facto indexed-linked borrowing) for their sponsors, to be 'serviced' alongside their
more conventional external indebtedness. Perhaps that has become most obvious when a fund is
calculated as being in deficit.
It would seem that in recent years there has been a keener awareness of this way of thinking
analytically about pension obligations. If there has been an 'awakening', maybe it was triggered by a
combination of the volatility of the value of equities held by funds, especially when they fell sharply a
few years ago; the volatility of the discounted value of their liabilities as long-maturity real rates fell;
regulatory requirements governing the closure of deficits; and fluctuations in the net value of funds
having for the first time to be reflected in firms' capital in their financial accounts.
Firms may, therefore, have been reviewing their preferences between risk-taking in their core business
and risk-taking via pension provision, and for a while may have been unusually uncertain about how
equity markets value those different sources of uncertainty. If so, that may conceivably offer part of the
explanation for the measured recovery in UK business investment having been weak, relative to the
economy's total output, compared with past cycles (Charts 11 and 12). Some have suggested that the
need to close deficits may have been a factor, via the call on cash flows. The possibility I am airing is
that another factor may be the size of a scheme's discounted liabilities and the prospective volatility of
the associated fund's net value relative to the sponsor's underlying business and capitalisation.
I do not want to push that too far. There have, of course, been other possible explanations for weak
fixed-capital expenditure. These include competition from China, India and elsewhere; the rise in oil
and commodity prices; and the uncertainty about how both will play out, and thus about prospective
demand for UK output. All of this might have been thought to make the external environment unusually
risky and so to warrant deferral of investment decisions.
Another possible explanation is, simply, that the level of investment has been under-recorded, and
that the data will be revised up, as they have been frequently in the past (Chart 13). Indeed, as the
share of economic activity accounted for business and financial services increases, it is even possible
that a growing part of business investment is simply unmeasured. When your teams spend time
developing spreadsheets that will be used for 3-5 years, do you count that as investment?
So it is difficult to know whether or not the management of risks associated with pension provision has
had a bearing on the recent measured weakness in business investment.
Financial market uncertainties
It has, though, surely been an important factor in financial markets in recent years.
The most obvious manifestations have been associated with their own jargon: Liability-Driven
Investment (or LDI), and so-called 'alpha-generating' active-management strategies.
LDI involves matching a fund's assets more closely with its quasi-fixed-income liabilities, via
purchases of long-duration conventional bonds, inflation-indexed (or real) bonds, interest-rate swaps
and inflation swaps. This may well have amplified the fall in very long-maturity real forward rates,
which has been such a puzzle in recent years (Chart 14).
Greater asset-liability matching represents a reduction of risk, and so - at least at first blush - does
not obviously square with a more aggressive approach to active management via increasingly popular
'alpha' strategies. But quite what such strategies entail may need a bit of unpacking.
Conventionally, in the framework of the Capital Asset Pricing Model, 'alpha' would refer to excess
riskadjusted return (a nice thing if you can get it!). In practice, the term seems to be deployed rather
loosely, being used variously to cover allocations to assets whose returns have in the past been
relatively uncorrelated with a fund's liabilities; leveraged - that is to say, risk-enhancing - plays across
almost any asset class; and giving greater freedom to fund managers. For pension funds, one
motivation has probably been to diversify asset portfolios, perhaps evidenced by bigger allocations to
private equity, commodities etc. Another motivation, both here and overseas, seems to be to try to
close deficits partly by earning high investment returns on some proportion of their asset portfolios.
Cast in that light, it appears to be part of the broader 'search for yield', which has been offered by
some as contributing over the past couple of years to the compression in credit spreads and other
market-based indicators of risk, such as the price of options on most asset classes.
Two responses to this have circulated amongst market participants, both intermediaries and asset
managers. One is that falls in implied risk premia truly have reflected a reduction in risk. The other is
that, while that story might hold up to a point, risk has been under-priced.
It is certainly plausible that structural change has caused risk to decline somewhat over the past
decade or so. First, monetary policy regimes have become more credible. That being so, central
banks may be able to stabilize demand and output growth more effectively than in the past. Most
obviously, cuts in interest rates are now much more likely to be understood as a response to an
adverse demand shock rather than as attempts to generate extra demand and jobs in the short run at
the cost of stoking up higher medium-term inflation. And so it is easier for central banks to cut interest
rates when that would desirable in order to stabilise demand conditions and so keep inflation in line
with the target. Related to that, greatly increased transparency across the central banking world
makes policy surprises - and so outsized market reactions to policy decisions - somewhat less likely.
Second, more competitive and transparent product markets (partly thanks to the internet), together
with more flexible labour markets, may have improved the real economy's ability to absorb nasty
shocks without persistent large falls in output. Third, developments in banking probably mean that
more households have access to credit to help them to smooth their consumption by borrowing during
'bad times'. And by routinely distributing more risk to non-banks, the banking system may be less likely
to wish or need to conserve capital, refraining from taking risk, when faced with increased demand for
liquidity from its corporate and household customers. For these reasons, consumption growth may be
less prone to violent lurches than during, say, the 1970s and 1980s.
In parallel, new techniques for unbundling and distributing risk, and possibly also asset managers
working under fewer constraints than in the past, may have made financial markets more efficient. For
any given level of expected volatility in the economy, that may have enabled investors to hold more
diversified portfolios, reducing the excess returns (or risk premia) required for bearing the residual
undiversified risk.
Taken together, other things being equal, these factors would tend to work in the direction of reducing
inflation risk premia and term premia in government bond yields, credit spreads, equity risk premia,
and implied volatilities derived from options.
But there are important qualifications to this story, especially regarding what it implies looking forward.
First, various cyclical developments, such as corporate sector balance sheet repair, have probably
reduced risk. And, of course, growth is currently robust pretty uniformly across the world economy.
Those features of the environment may have reduced risk premia, cyclically. There is no way to
separate out with any precision the cyclical and structural, potentially more persistent, influences on
the price of risk. Second, the importance of some of those structural factors may be exaggerated by
market participants. Closest to home for me, I would not want anyone to think that central banks are
capable of delivering uninterrupted growth indefinitely. And while central banks no longer seek to
spring surprises on the market, our community could not rule them out if circumstances were to evolve
where the market misperceived the implications of a central bank's analysis of the outlook.
But perhaps the most important point for the pricing of risk in capital markets is the following. To the
extent that a structural story of some kind holds true, the consequent reduction in risk premia, and the
associated rise in asset prices, would broadly be a one-off - even if drawn out. In other words, it would
not be sensible for market participants both to place weight on the argument that risk premia were
lower because there was fundamentally less risk, and at the same time to extrapolate ex post returns
on assets into the future. Headline returns would be lower than in the hypothesised 'old world' when
risk premia were higher; and would be a lot lower than during the period when risk premia were falling
to a new, lower level (Diagram A).
This may not be completely idle speculation in a market environment where, anecdotally, fund
managers have been chasing returns. And, of course, to the extent that past returns have in degree
been extrapolated into the future, the effect might be an over compression of risk premia.
That has to be for you and other market participants to judge. What, from the sidelines, we have
observed is striking innovation in ways of taking and distributing risk, against a background of strong
asset-price performance in recent years and a presently benign macroeconomic environment. Over
the past few years and currently, this has, perhaps, been most obvious, and most topical, in the
structured finance markets. These are the markets in which portfolios of loans to households and
companies - or synthetic versions of such loans created via credit derivatives - are bundled up into,
for example, collateralised loan obligations (CLOs) and collateralised debt obligations of asset-backed
securities (CDOs of ABS). The slicing and dicing of credit portfolios into different risk tranches can give
end-investors access to assets more finely tailored to their particular demands and risk appetites. In
most circumstances, that should distribute risk more effectively, buttressing the stability of the market
and of the financial system as a whole. Looking ahead, a few questions are nevertheless posed by
market participants.
One is whether the CDO factory has amplified the compression of credit spreads. The argument
advanced goes roughly as follows: that, as credit spreads have fallen, the returns have become
unattractive unless leveraged up; that the new technology for acquiring leverage6 has drawn new
sources of capital - including hedge funds - in to the credit markets; and that this increase in demand
has fed through to a lower price for credit risk - ie lower spreads, easier convenants, etc - in the
underlying loan markets, including for financing LBOs. These new instruments have of course
emerged, and so have been priced, during a period when the default rate has been extraordinarily low.
A second question is whether the trade off between the demand for financial engineering and the
demand for liquidity in the structured finance markets, not just amongst leveraged players, could
switch - back to liquidity - if market conditions were to shift from benign to stressed. An illustration of
what can potentially happen is perhaps provided by the disruption just over a decade ago in the US
Collateralised Mortgage Obligation (CMO) market. After a period of ever more refined financial
engineering of mortgage claims into capital market instruments, resulting in some fairly illiquid
tranches being created, stress occurred when the dollar yield curve rose sharply in 1994. This
underlines the importance of industry scenario analysis building in some allowance for the possibility
of system-wide liquidity stresses.
A counterpart to whether market volatility could occur is the question of whether risk could flow back to
the banking sector in adverse circumstances. Over the past decade, many banks have moved towards
business models based around originating and distributing credit assets rather than holding them. But
no one suggests that banks escape the risk completely. They warehouse risk before it can be
securitized, and those warehouses will probably have grown with the volumes flowing through the
securitisation markets. To a greater or lesser extent, they hold on to loans and securitised
participations if they think them attractive, or perhaps punitively expensive to distribute. Through their
prime brokerage operations, they finance leveraged holdings against collateral. And they sometimes
provide committed lines of credit. Overall, this is akin to writing deeply out-of-the-money options,
exposing the banking system to tail risk. That should not be too surprising given that commercial
banks' liabilities are money, and so they are in the business of providing liquidity insurance. But it does
make it difficult for market participants to assess, and price for, how much risk there is, albeit
contingently, in the system as a whole.
Conclusion
Many of the developments I have reviewed are, of course, good news. Most obviously, longer life
expectancy! Greater macro economic stability; financial innovation distributing risk more efficiently -
these are pretty good things too, including for you as corporate treasurers. As a result, some risks
have been reduced or are now easier to manage.
But risk management challenges do unquestionably remain for you as corporate treasurers. Some,
such as those arising from pension provision, essentially boil down to your appetite for risk and the mix
of business/financial risk you want. Others stem from a range of uncertainties in capital markets. When
and how global imbalances will be resolved. Whether risk is underpriced. How still-new structured
finance markets would withstand a marked pick up in defaults. You will each have your own list.
Those uncertainties and risks have to be identified, priced and managed. The official sector cannot
make them go away.
But it is our mission to reduce uncertainties stemming from monetary policy and its implementation.
Some important sources of uncertainty in the past were, in fact, avoidable. For some years now,
monetary policy decision taking has benefited from having a clear framework and from the Bank being
transparent about its analysis of the economic outlook. Yesterday, by modernising the sterling money
markets, the Bank provided a similarly clear framework for how we implement those interest rate
decisions. I hope it makes your jobs a little easier.
ANNEX: CHARTS/TABLES
Table 1: Annualised volatility of UK interest and inflation rates
10-year spot 10-year forward 10-year forward
yield yield inflation rate
1970-1992 211 236
1985-1992 124
1993-2006 125 117 85
1998-2006 98 78 54
Note: Average monthly standard deviation, annualised and expressed in basis points
Source: Bloomberg and BoE calculations
Chart 1: Volatility of sterling overnight interest rates
Per cent
15
Extension of BoE
MMR Interim
lending facilities
Reforms
10
5
high
0
low
-5
-10
1994 1996 1999 2002 2004
Source: BoE calculations
Chart 2: Volatility of international overnight interest rates
Per cent
7
6
£ 5
4
€
3
US $
2
1
0
1999 2000 2001 2002 2003 2004 2005 2006
Source: Bloomberg and BoE calculations
Chart 3: Cumulative folded distributions of overnight/policy rate spreads
Sample period: Jan 2002 - 11 Mar 2005
Sample period: 14 Mar 2005 - May 2005
50 50
50 50
£
£
$ $
40 60 40 60
cent cent cent cent
€
€
per per
per per
30 70 30 70
Interquartile Interquartile
Range Range
frequency, frequency, frequency, frequency,
20 80
20 80
10 90 10 90
Cumulative Cumulative Cumulative Cumulative
0 100 0 100
-1.0 -0.8 -0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 -1.0 -0.8 -0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0
Percentage points Percentage points
Chart 4: Outstanding sterling bank deposits by private non-financial companies
£ billion
120
100
80
time deposits, repos and CDs
60
40
interest rate bearing sight deposits
20
0
1998 1999 2000 2001 2002 2003 2004 2005 2006
Source: BoE
Chart 5: UK corporate sector retained earnings, investment
and financial balance
% of gross operating surplus
80
Saving
(retained earnings)
60
40
Investment
20
0
-20
Financial balance
-40
1987 1989 1991 1993 1995 1997 1999 2001 2003 2005
Source: ONS
Chart 6: Accumulation of cash by private non-financial corporate sector
(average 2003-04)
Per cent of gross saving
60
50
40
30
20
10
0
UK US France Canada Italy Japan Germany G7
Note: Gross saving is defined as non-financial corporate profits after net interest and
taxes, less dividends paid. Source: IMF
BIS Review 47/2006
Chart 7: Contributions to growth in UK non-financial company sterling deposits
Other
Legal, Accountancy & Other Business Activities
Transport, Storage & Communication
Percentage point contributions to
Wholesale & Retail Trade
change on a year ago
Real Estate
12
Construction
M anufacturing
10
Utilities & Primary Industries
Total
8
6
4
2
0
-2
-4
1998 1999 2000 2001 2002 2003 2004 2005
Source: BoE
Chart 8: Employer pensions contributions
Per cent of gross corporate savings
50
40
30
20
10
0
1990 1992 1994 1996 1998 2000 2002 2004
Source: ONS
Chart 9: Employer pensions contributions
£ billion, 2005 prices
60
50
40
30
20
10
0
1992 1994 1996 1998 2000 2002 2004
Source: ONS; data shown are expressed in 2005 prices using RPI inflation
Chart 10: One-off and regular employer pension contributions
£ billion
Regular contributions
35
Special/one-off contributions
30
Tota