Changing attitudes to work since the pandemic and sluggish business investment have hit the UK’s potential growth rate and kept inflation elevated, Bank of England Governor Andrew Bailey said.

Speaking to an audience of central bankers hosted by the Group of 30 in the Moroccan city of Marrakech, he said potential growth in the UK has fallen from 2.25%-2.5% in the past to “at best, 1.5%.”

“That complicates monetary policy,” Bailey observed.

The governor cited two reasons for the reduction in Britain’s growth rate — labor markets and business investment — and urged the government to press ahead with supply-side reforms to lift the UK’s economic capacity.

“We have seen, in the UK, a withdrawal of labor supply,” he said. “I think Covid has changed people’s attitudes to the way they participate in the labor market – and we have to come to terms with that, and understand its implications.”

Bailey also called on the UK pensions industry to “play its part in investing in private-sector assets.”

“There is an important role for it in supporting private investment,” he said.