Britain's recovery still faces euro zone drag - BoE's Carney
LONDON Dec 17 (Reuters) - Bank of England Governor Mark Carney warned on Tuesday that Britain's economic recovery could be held back by the weakness still plaguing the euro zone, the main market for British exporters.
"The headwind from very weak demand - likely very weak demand for some time - from our major trading partner Europe, the combination of all that could reduce the potential growth of this economy for some time," Carney told members of Britain's upper house of parliament.
"This is less likely to be a robust, sustained recovery," he said in his first question and answer session with the lawmakers.
Britain has grown more quickly than almost all other developed economies this year. But the recovery has been driven by consumer spending while exports have failed to pick up, held back largely by the hangover from the euro zone debt crisis.
Carney said another important part of Britain's recovery, an increase in investment by companies, was also not in place.
"There has not been a sharp upturn yet on business investment and certainly measured productivity we see as lacklustre and the level of productivity remains at levels before the crisis," he said.
Carney took over the BoE in July and a month later the Bank said it would not even consider raising interest rates from their record low of 0.5 percent until Britain's unemployment rate falls to 7 percent.
Since then, the recovery has gathered more speed and the economy is growing at an annualized rate of more than 3 percent. But Carney, in his appearance before the Economic Affairs Committee of the House of Lords, reiterated his view that the economy still needed help.
"It is welcome that the economy is growing again, but a return to growth is not yet a return to normality," he said. "The recovery has some way to run before it would be appropriate to consider adjusting the exceptional level of monetary stimulus that we continue to provide to the economy."
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