markets function well. in doing so, it will aim to advance the protection of consumers, the integrity of the uk financial system and promote effective competition. it will be responsible for the conduct regulation of all financial services firms, and the microprudential regulation of those financial services firms not supervised by the pra, for example, asset managers, hedge funds, many broker - dealers and independent financial advisers. developments in the real economy whereas those institutional arrangements are new and exciting, the economic data have been disappointing for some time, notwithstanding some improvement in the most recent indicators. since the trough in output in mid - 2009, gdp has averaged just 0. 3 % per quarter. this “ recovery ” has been much weaker than previous cyclical upswings – and according to the recently published may inflation report projections, output is more likely than not to remain below its pre - crisis level for another year or so. there has recently been a lot of discussion about whether the uk has suffered a double - dip recession or not. but to focus on whether growth is a bit negative or a bit positive is to use the wrong reference point. trend growth should be more like 0. 6 % a quarter and we have only had five quarters of growth at that rate or higher in the 21 quarters since the start of 2008. there had been no such weak period in the uk since quarterly gdp data were first published in 1955. even compared with previous examples of financial crisis – whether at home or abroad – the uk economy has been puzzlingly weak for a long time. i want to take the opportunity today to offer a possible explanation that at least fits some of the data. much of what follows has been used as a narrative in recent inflation reports. it is as if the different groups within our society – households, businesses, banks and the government – have all decided that their future financial positions, on average, will be worse than they thought before the crisis. as economists, we would say “ a reduction in estimated permanent income ”. i will come back to reasons why, but, given that premise, we can explain much of what is happening. the household sector, of course, has people in many different circumstances, so one can ’ t tell a single story. but, subject to the vagaries of data revisions, it appears that people on average are saving much more than they were pre - crisis. some may be trying to reduce debt levels ; some saving to fill holes in expected pensions ; some for

paul fisher : the outlook for the uk economy speech by mr paul fisher, executive director for markets of the bank of england, to the cardiff breakfast club, cardiff, 24 may 2013. * * * introduction it ’ s nice to be back in cardiff again. as always, i will be taking the time while here to visit a number of local businesses in an effort to find out what is happening “ on the ground ” in the welsh economy. our network of agents across the uk provide the mpc with valuable intelligence on a continuous basis, but there ’ s nothing quite like hearing it at first hand for oneself. recent changes at the bank of england i ’ d like to start this morning by outlining some of the recent institutional changes at the bank of england, which will help shape the policy environment for a generation. first of all, supervision is back! the new prudential regulation authority, a subsidiary and therefore part of the bank of england, has moved into its new offices at 20 moorgate, just a two minute walk from the back of threadneedle street ( or faster on a cold morning! ) the move back to the bank will help us to exploit the synergies between microprudential supervision on the one hand and the markets, economics and financial stability expertise of the wider bank on the other. but most importantly this is an opportunity to change the way in which banks ( and building societies, credit unions, insurers and major investment companies ) are supervised. there will always be financial firms that fail through making bad judgements and taking risks which crystallise ; or because unforeseeable events crop up. we have to allow that to happen in an orderly manner and without the use of public money. but good supervision should make sure that financial firms are focussed on the big issues, are appropriately capitalised, sufficiently liquid and not excessively leveraged. the pra will focus on those institutions and issues which pose the greatest risk to the stability of the financial system. and their approach to supervision will be to make forward - looking judgements about the risks posed by firms, based on evidence and analysis ( and not constrained by a narrow interpretation of either domestic or eu rules ). second, the financial policy committee is now established with statutory powers. its primary objective is to identify, monitor and take action to remove or reduce systemic risks with a view to protecting and enhancing the stability of the uk financial system whilst having a secondary objective – like the mpc