And the Bank is thinking through how regulation may need to change with the investment needs of the new economy, including new approaches to risk models and secured lending in a world of intangible capital and data-based finance. 9  In April 2018: https://www.bankofengland.co.uk/news/2018/april/non-bank-psp-access-to-the-payments-system-announcement. McKinsey World Payments Map (2016). The G20’s LEI, which originated as a risk management tool for the financial sector, standardises identities for companies. See https://www.bankofengland.co.uk/news/2018/june/iso-20022-consultation-paper-a-global-standard-to-modernise-uk-payments. 10 11  6  All speeches are available online at www.bankofengland.co.uk/speeches  6  b) The New World As the UK economy changes, the world is being reordered. Over the past quarter century, emerging economies’ share of global activity has risen from 40% to 60% and their share of global trade from one fifth to one third. Yet at present, their financial assets make up only 10% of the global financial system. This will quickly change. As emerging market economies continue to open up, their share of global financial assets could treble to around a third by 2030. Maintaining the UK’s share of cross-border capital flows during this process could plausibly increase the balance sheet of our financial sector we host from the current 10 to 15 times GDP by 2030. This will significantly boost UK prosperity – provided the associated risks of such an open system are managed responsibly. Responsible openness rests on three pillars. The first is strong global standards. The UK has been at the forefront of G20 reforms to create a global financial system that is safer, simpler and fairer.

The crisis in the housing sector, together with falling employment and weaker growth in real wages meant that I found it hard to believe that the US economy would turn upwards as quickly as assumed in the forecast. Moreover, the forecast for global growth assumed that there would not be any substantial slowdown in economic activity in the emerging economies. However, my assessment was that growth would also weaken there. The rises in energy and food prices entail cost increases and reduce purchasing power in these countries too. I also pointed out the rapid slowdown in the growth rate in the euro area. All in all, I considered there were risks that economic activity abroad would weaken more than was forecast in the September Update. In Sweden, there were clear signs of an economic downturn as early as the monetary policy meeting in July. In September we could see that growth in the second quarter had slowed  6  BIS Review 119/2008  down much sooner than expected. The situation in the Swedish labour market remained strong, but even here there were indicators, such as labour shortages, the number of job vacancies and redundancies, pointing to a cooling down. Productivity and inflation Productivity in Sweden has been weak since the beginning of last year. This means that unit labour costs as measured in the National Accounts are increasing more quickly. There is thus a risk that companies will try to pass on their cost increases to consumers, which would result in higher inflation.