Reviewing some of the necessary conditions for continued business growth in the 1990s, the Governor stresses the interdependence of the various sectors of the economy, and in particular the links between the service and manufacturing sectors. Despite the move in the United Kingdom and in other industrialised countries towards high-tech and service industries, the manufacturing sector remains an important and integral part of the UK economy, with a share of total output which is similar to most of the other G7 countries. Turning to the necessary ingredients for future business growth, the Governor highlights the importance of free trade and free markets, the need for greater flexibility in the labour market, and in particular the need for innovation and technological advance to maintain productivity and profitability. The quality of investment, however, is just as important, if not more so, than the amount; rather than being artificially stimulated, investment should be undertaken in response to adequate demand for a product. In this context, the Governor argues that investment decisions, with long-term interests in mind, can only sensibly be taken within a predictable medium-term macroeconomic framework which ensures both price stability and policy stability.
Business and the economy - Governor's speech at the Manchester Business School