This will result in an extra 0.1% of GDP in infrastructure spending in 2017/18, rising to 0.3% of GDP by 2021-22. Over five years, the incremental spending amounts to an extra £ billion. This fund will be focussed on transport, housing, telecoms and research and development. 22  Just yesterday, the CBI published a report on differences in regional productivity performance and outlined a sequence of measures to help boost productivity and narrow regional differences. These measures included developing regional scorecards to enable productivity hotspots (and coldspots) to be identified; increased investment in skill-building through improved school and vocational education; increased infrastructure, in particular transport, spending; and improvements in managerial practices. The work of the “Productivity Commission”, chaired by Sir Charlie Mayfield, has identified a long tail of companies across all sectors in the UK whose productivity performance is falling short. 23  The Commission  are developing, among other things, a tool which would enable firms to benchmark themselves relative to others in their sector along several key business dimensions. This could then serve as a prompt for action, enabling firms to boost their productivity performance through targeted action. I think this micro-level assessment of productivity is a useful way to formulate plans which support productivity, and narrow productivity differences, regionally and sectorally. For example, recent work by the OECD has looked at the changing distribution of productivity across firms over time.
Consistent with that, my subjective distribution of risks around these projections is now symmetric. On the upside, the fall in sterling has had a quite pronounced and, as importantly, persistent impact on financial market and, to a lesser extent, consumer measures of inflation expectations. Financial market measures of expected inflation five years ahead over the following five years have risen by around 60 basis points from their mid-year low-point. There has also been a tick-up in equivalent measures in the US and euro-area over the past few months of around 50 and 30 basis points respectively (Chart 16). In each case, this does no more than take inflation expectations back to around where they were at the start of the year. In other words, recent adjustments have removed the downside skew to inflation expectations which had emerged. In that sense, the recent adjustment in inflation expectations is benign and helpful. Nonetheless, a further large upwards shift in expectations from current levels would, I think, be less benign and possibly unhelpful, especially if it were expected to persist. On the downside, I think there is still a material chance that growth could under-perform relative to expectations during the course of next year – for example, if the squeeze on household incomes prompts a larger adjustment in household spending. In that event, the upside pressures on inflation would be weaker than expected.