. it also reflects the policy response to the shock – the mpc cut bank rate to 0. 25 %, launched a term funding scheme to reinforce the pass - through of that cut, and embarked on a new round of asset purchases ; and the fpc cut the ccyb. fiscal policy has also been more supportive, and the world economy grew more strongly than we had expected. but part of that performance also appears to reflect the underlying resilience of the uk labour market. the growing flexibility of the labour market has been a theme in uk economic policy developments for some time. the share of long term unemployed has fallen steadily from its 1980s peak of 4½ % to reach 1 % now ; even in the financial crisis, when unemployment stayed around 8 % for several years, long term unemployment remained below 3 %. this resilience is good news, and has been positive for households and businesses. but as policymakers it is important that we look at the underpinnings of this resilience. gdp growth since the brexit referendum has mainly been supported by continued consumption growth, even despite the hit to real household income caused by the fall in sterling around the referendum. consumption has instead been funded, perhaps less sustainably, by a historically low household saving ratio. net trade on the other hand has performed less strongly ; while it did support growth immediately following the referendum and in response to the all speeches are available online at www. bankofengland. co. uk / news / speeches accompanying depreciation, that boost has now come to an end, and slowing trade is now dragging on growth. chart 7 : g7 business investment chart 8 : business investment compared with previous recoveries indices : peak in gdp = 100 percentage changes on a year earlier eu referendum act - 5 - 10 - 15 - 20 - 25 g7 ( ex. uk ) uk quarters since pre - recession peak in gdp at the same time, business investment has been strikingly weak. investment growth was already slowing ahead of the brexit referendum ( chart 7 ). following the referendum it has come to a complete stop. in fact the level of business investment has actually fallen slightly over the past three years – that is despite a supportive global environment and accommodative financial conditions that have supported growth in other countries, and in contrast to the 7 % - plus annual growth we were forecasting ahead of the referendum. and over 2018 it fell for four consecutive quarters by a total of 2

global standards for liquidity regulation are now in place including the liquidity coverage ratio and net stable funding ratio. bank capital standards now take into account exposures to shadow banks, including step - in risk, and through - the - cycle margining prevents minsky cycles in secured lending. see https : / / www. fsb. org / wp - content / uploads / r191118 - 1 - 1. pdf. see https : / / www. esma. europa. eu / sites / default / files / library / esma50 _ 157 _ 2025 _ asr _ derivatives. pdf. all speeches are available online at www. bankofengland. co. uk / news / speeches these reforms are transforming banks ’ approach to liquidity management and building the resilience of the system as a whole. for example, liquid assets – relative to liabilities that can readily run – are tenfold higher than before the crisis. however, the recent volatility in us dollar repo markets suggest there are still frictions that need to be addressed. contrary to expectations, banks did not step into the market to lend cash, viewing the profit opportunity to be insufficient to offset the impact on perceived regulatory liquidity requirements. the federal reserve ’ s open market operations have since calmed the market, but term repo rates remain elevated, as dealers are pricing in a higher likelihood of similar spikes in future. while it may be tempting to conclude this is an isolated incident, there have been others, including the taper and bund tantrums. these could signal a broader problem of discontinuous market liquidity in stress. the solution is not to unwind post - crisis liquidity regulation, a recidivism that would only recreate, with time, the enormous systemic risks of the past. moreover, the limited systemic consequences of these events should be noted. after all, the riskiness of an asset depends on who holds it. a “ crisis ” in the periphery is a bad day in the markets ; one in the core is an annus horribilis for the real economy. nevertheless, market infrastructure must evolve to take account of new dynamics. in one of benoit ’ s ( many ) speeches last month, he identified one of the potential problems underlying the repo market stress : that what may look to be sufficient liquidity in aggregate can prove too little if it is asymmetrically distributed – either across institutions or national boundaries