That can mean a “second engine” for growth from abroad. But it can also mean a dragging anchor when things go awry across borders. 5  See for example Grossman, G and Helpman, E (1991), Innovation and growth in the global economy, MIT Press. 4  BIS central bankers’ speeches  3. Role of the EU in UK dynamism and stability  How has the EU affected the UK’s dynamism and stability? Let me begin with the first. 3.1  Role of EU in UK dynamism  In some respects the UK is the leading beneficiary of the famous “Four Freedoms” first set out in the 1957 Treaty of Rome.6 These are the free movement of goods and services, capital and labour, enhanced over time through a range of measures to reduce impediments across the EU. So although the UK’s dynamism is the product of many factors including deep human capital, well-developed physical infrastructure, a competitive fiscal regime and the rule of law; the EU has arguably bolstered it by establishing the world’s largest single market with free movement of goods, services, capital and labour. The UK has further benefited from these dynamics by retaining relatively flexible labour and product markets. In product markets, home and foreign firms receive close to equal treatment; the administrative burden on start-ups is second lowest in the G7; incumbent firms receive the lowest regulatory protection in the G7; and product market regulation is light (Charts 5–8).
The genius of Wren’s ceiling was its inspired interlocking beams, individually insufficient to span the Sheldonian’s diameter, but collectively arranged so that each could support another, perfectly balancing the forces of those pushing down with others pushing up, resting, ultimately, on the foundations Wren began in 1664. And this is the architecture of Europe: a single market whose participants are interlinked, relying on and complementing each other. Just as Wren’s wooden lattice supports Robert Streater’s art, this market network supports the creativity of Europe. Of course, the weight of the ceiling doesn’t disappear but rests on hidden foundations. So too does the single market rely on invisible supports, some of which are the responsibility of the Bank of England and European regulatory authorities. While these foundations have worked well thus far, they may in time need to be buttressed to realise the full creative potential of the peoples of the United Kingdom and Europe. BIS central bankers’ speeches  9  Charts Chart 1: UK trade is two-thirds of GDP  Chart 2: UK receives largest share of EU FDI(a)  Source: OECD  (a) EU-15 countries’ share of average annual FDI inflows into the EU: 1993 to latest. Source: UNCTAD. Chart 3: Global activity of UK financial system unmatched in the European Union…  Chart 4: … and UK financial system is very large relative to GDP(a)  Notes: Bars show share of global activity for cross-border lending, interest rate OTC derivatives and foreign exchange and share of global assets for all other categories.