Overall, the central view is one of inflation rising further above the target in the near term, before falling back to the target. The risks around that benign central view are seen by the MPC as broadly balanced, but there is significant uncertainty about the outlook for inflation. The outlook for growth remains one of a continued modest rebalancing of demand, with consumer spending growing at close to its long-run average rate, business investment continuing to recover, and net trade making a small positive contribution to growth. The MPC judges that assessing the margin of spare resources in the economy is unusually difficult at present. Capacity utilisation within companies, as measured by surveys, has risen. Although unemployment has risen further, it is difficult to know how much of the rise in unemployment actually represents increased slack in the labour market. Over the past year or so, the labour force has grown rapidly, following strong migration from Eastern Europe and elsewhere, and a rise in participation rates. There is, of course, great uncertainty about the scale of migration which has clouded estimates of the supply capacity of the economy. Moreover, it is difficult to know how far migration affects demand for goods and services as well as supply. So the overall impact of migration on inflation in the medium term is unclear.
Rather, there is a market out there where low wages are not the most important form of competitive advantage. We have seen that in the ‘Best of the Black Country Awards’, where last year’s winners were drawn from the manufacturing, services and construction sectors, and where the winners included both new and established companies. Moreover, the Black Country tradition of numerous small firms operating cheek by jowl is exactly the model so successful in Silicon Valley and Bangalore, in science parks and film studios, and in financial centres around the world. Of course, some of the old ways have gone, and many manufacturing companies have perished. Recent years have not been easy for the Black Country, especially as profit margins have been squeezed by greater competition from overseas. But there are – as you yourselves demonstrate – many examples of the regeneration of the Black Country, be they new businesses or older ones re-focussing their activities. And the changes underway here are not restricted to the purely economic. The Black Country has seen successes in education, culture and the media. In education, the University of Wolverhampton – impossible to imagine that there would be one when I was a boy – now has over 23,000 students. The University has put its motto – ‘Innovation and opportunity’ – into practice, through its partnerships with the Wolverhampton Science Park and the TelfordWolverhampton Technology Corridor. In culture, the New Art Gallery in Walsall opened in its internationally acclaimed building in 1999.