higher expectations of lenders ’ underwriting standards for consumer credit, and recalibrated the leverage ratio. with detailed contingency planning for the financial stability impacts of brexit, uk companies can be confident of continued access to finance in an uncertain world. reforms mean the uk financial system is working well. net lending to private companies is been growing following six years of contraction. corporate bond spreads are well below their long - run averages ( chart 13 ). and credit conditions among smes have been steadily improving. if the opportunities present themselves, uk corporates could readily draw on this finance as their balance sheets are in good health following a decade of de - levering to ratios amongst the lowest in advanced economies. turning now to monetary policy, the bank operates within an established framework, anchored in the inflation target ( chart 14 ). the mpc set out in advance of the referendum how it would apply that framework, emphasising that the effects of the process of leaving the eu on inflation would depend on its impact on demand, supply and the exchange rate. the committee has repeatedly stressed that, as a result, the implications for monetary policy would not be automatic. the mpc has also clearly set out its reaction function consistent with its remit. under the exceptional circumstances brexit entails ( with an inflation overshoot driven entirely by an exchange rate depreciation caused a large fundamental shock ), the committee is required by its remit to balance a period of abovetarget inflation with a period of weaker growth. as the primary objective of monetary policy remains inflation control, any overshoot of inflation above the target can only be temporary in nature and limited in scope. as such, the mpc has been clear that its tolerance for above - target inflation is limited. since the prospect of brexit emerged, financial markets, notably sterling, have marked down the uk ’ s economic prospects. monetary policy cannot prevent the weaker real income growth likely to accompany the transition to new trading arrangements with the eu. but it can influence how this hit to incomes is distributed between job losses and price rises. and it can support households and businesses as they adjust to such profound change. see the statistical annex to the bank for international settlements 87th annual report, ibid. all speeches are available online at www. bankofengland. co. uk / speeches as spare capacity erodes, the trade - off that the mpc must balance lessens, and, all else equal, its tolerance for

policy panel : investment and growth in advanced economies remarks given by mark carney, governor of the bank of england 2017 ecb forum on central banking, sintra 28 june 2017 all speeches are available online at www. bankofengland. co. uk / speeches the experience of business investment in the uk since the onset of the financial crisis broadly matches that elsewhere in the advanced world – a sharp fall followed by a feeble recovery ( chart 1 ). peak to trough, the level of uk business investment fell by 20 %, and it was six years before it surpassed its pre - crisis level, putting the recent experience at the bottom of the swathe of past uk cycles ( chart 2 ). in my brief remarks today, i will offer some possible explanations for this performance before concluding with comments on the outlooks for uk investment and monetary policy. i. investment since the crisis in part, weak investment reflects a weak economy, with the recovery following the crash being the slowest since the great depression. weakness in demand is not, however, the whole explanation. business investment has underperformed relative to output since the crisis, with the ratio of the two falling in the uk by around 2 percentage points in the immediate aftermath ( chart 3 ), similar to the experience in other advanced economies. falls in investment tend to be more persistent for recessions associated with financial crises ( chart 4 ). this partly reflects restrictions in credit supply constraining investment, as well as productivity, wages and economic performance more generally. but weak uk investment also reflected a necessary adjustment in the capital stock. that overhang – which peaked at close to 10 % in the uk – is being gradually worked off through a combination of a recovery in output and a prolonged period of subdued net investment ( chart 5 ). and in part weak investment could reflect a misallocation of capital in the run - up to the crisis. in this regard, the situation in the uk was a bit different to that in countries such as spain and the us where significant residential and commercial property construction booms subsequently turned to busts. without a housing glut to work off, the weakness of uk investment is all the more striking. another form of misallocation could be the ability of so - called zombie firms to live on in the very low interest rate environment. the bis ’ s proxy for this has seen the share of the “ living dead ” more than double since the crisis. in contrast, the bank of england estimates that the