Bank of England chief warns of two threats to UK’s economy | Personal Finance | Finance

Britain’s economic future is under threat from tariffs and an ageing population, the Bank of England’s governor has warned.

Andrew Bailey warned that stagnating productivity had dragged down living standards for the past 15 years, ahead of Wednesday’s crucial spring statement

Bailey warned that growth has slowed “markedly” over the last 15 years which has affected the advance of living standards.

However, he also drew attention to some more positive developments, arguing that artificial intelligence and other emerging technologies could transform the economy – if properly harnessed by ministers.

Chancellor Rachel Reeves is now preparing to unveil £15 billion in public spending cuts following a downgrade in growth forecasts. The move has sparked fears of a return to austerity, a claim strongly denied by Labour.

Bailey also highlighted Trump’s tariff threats in his speech, warning that free trade was essential for boosting productivity. Quoting 18th-century economist Adam Smith, he said: “If a foreign country can supply us with a commodity more cheaply than we can make it, better buy it off them.”

Bailey flagged the economic risks posed by an ageing workforce, warning that growth can no longer be driven by rising employment numbers. Instead, he said, technological innovation will be key to boosting productivity and prosperity.

He dismissed fears that AI could lead to mass unemployment and instead highlighted it’s potential in lifting growth rates.

Meanwhile, Reeves is expected to cut projected public spending increases from 1.3 per cent to 1.1 per cent per year, saving around £5 billion.

Unprotected departments, including the Home Office, Ministry of Justice, and the Department for Housing, face deep spending cuts.

Some ministers have reportedly been asked to prepare for reductions of up to 11.2 per cent, prompting concerns that key services will suffer. A senior official warned: “If you’re in an unprotected department with rising demand, these are deep, deep cuts. It is austerity.”

As pressure mounts on the government, all eyes are now on Reeves’ statement on Wednesday – where she will have to convince the country that Labour’s economic gamble will pay off.