18 % of uk banks ’ domestic lending ; if one excludes the real estate sector, however, the figure is closer to 12 %. and lending to smes accounts for only 4 %. businesses borrow for many reasons not simply for investment, and business investment in the uk as a whole is the result of millions of uk businesses assessing the merits of individual investment opportunities, financing options and other considerations. in 2015, in order to get a better understanding of the supply of finance for productive investment and to support the government ’ s productivity plan, the bank initiated research into ‘ productive finance ’. our aim see imf ( 2015 ) ‘ uneven growth ‘, world economic outlook, april 2015. the wilson committee was formed in january 1977 with the following terms of reference :'to enquire into the role and functioning, at home and abroad, of financial institutions in the united kingdom and their value to the economy ; to review in particular the provision of funds for industry and trade ; to consider what changes are required in the existing arrangements for the supervision of these institutions, including the possible extension of the public sector, and to make recommendations.'the committee concluded that the availability of funds was not the prime cause of low industrial investment and identified two areas of concern. first, the reduction of new issues of long - term fixed - interest industrial debentures due to high and fluctuating rates of inflation. and second, that the provision of finance for small firms was generally accepted to be unsatisfactory in a number of respects. see moore, p, g'the wilson committee review of the functioning of financial institutions – some statistical aspect ', journal of the royal statistical society, vol. 144 ( 1 ), pp32 - 65. all speeches are available online at www. bankofengland. co. uk / speeches was to get a better picture of whether firms ‘ underinvest ’ – ie if they turn away profitable investment opportunities and if so what obstacles to investment they face. to do so, we launched a new survey of firms, the results of which are published today. the survey covered a sample over 1, 200 firms. it is representative of the population of uk firms across regions, industries and size. some caveats are required here. in the survey responses there was an under - representation of younger firms. this makes the results less informative about the investment behaviour and financing needs of younger companies, particularly of start - ups. moreover, as this is the first

6 per cent in the first and fourth quarters of next year, and just less than 6 per cent in 2017. this forecast faces sizeable risks, especially from currency depreciation as well as wage and price determination processes. with weak commodity prices and us monetary policy normalisation coming closer, we cannot be complacent about the exchange rate and its potential inflation consequences. furthermore, we confront medium - term inflation expectations bunched around the top of the target range. the risk of positive inflation shocks feeding into higher expectations and price setting remains very high. lael brainard, economic outlook and monetary policy ( http : / / www. federalreserve. gov / newsevents / speech / brainard20151012a. htm ), 12 october 2015 ; binyamin applebaum, “ a 2nd fed governor opposes raising rates this year, breaking with yellen ”, new york times ( http : / / www. nytimes. com / 2015 / 10 / 14 / business / economy / a - 2ndfed - governor - opposes - raising - rates - this - year - breaking - with - yellen. html? _ r = 0 ), 13 october 2015 bis central bankers ’ speeches were the forecast more favourable or were inflation expectations anchored firmly within the target range, monetary policy would enjoy greater freedom of action. if wage and price setting in the economy were more attuned to weak demand and the usefulness of lower inflation, we would have more policy space. but we do not have that space. it has been eroded trying to get growth back up to potential. now we have to contend with significant risks of a sustained breach of the inflation target range. for this reason, we entered a tightening cycle in january 2014, which has so far brought the repo rate 100 basis points higher, to 6 per cent. the real rate has been slightly negative and is now about zero, relative to an historical real rate averaging around 3 per cent. this gradual and limited rise, occurring over nearly two years, has shown due concern for growth while maintaining our attention on a rising inflation rate. some voices say that this is a mistake : that we should let inflation go and focus on the output gap. this advice is problematic on several levels. as economic literature has repeatedly demonstrated and as our experience has once again demonstrated, the output gap is an unreliable measure. 10 it is a poor guide for policy at the best of times. it is an even worse reason to