The government’s hope that quantitative easing (QE) will pull the UK out of recession may be unfounded, as there is no lasting benefit in continuing to pursue the policy, a study by University of Bath’s Department of Economics professor Chris Martin has found.

The professor has looked at the impact of QE on both the financial markets and the ‘real’ economy of jobs, inflation and output, and concluded that QE has produced a limited but temporary gain for the financial sector, but has been of no help to the wider business community or against inflation and unemployment.

His review, entitled QE: A Skeptical Survey, included studies of the performance of QE by central banks, including numerous historical studies of small scale QE and of the large contemporary QE programmes. The latest policy has seen the Bank of England buy £375bn in gilts in order to bring down the cost of government borrowing and lower interest rates across the economy.

Martin said: “QE is serving to help the financial sector, such as banks and insurance companies. That’s useful because it’s a sector that was really facing the cliff edge in late 2008 and 2009 but in the end the aim of the policy is not to help the financial sector but to help the wider economy, and it’s not feeding through into that.

“We’ve had four rounds of QE, bought more and more bonds, and we’re still stuck.”

He added: “The fundamental problem in the UK is the lack of demand. Making the interest rate cheaper helps but it isn’t addressing the major problem. The government needs to start spending by employing people. It needs to get involved in large scale infrastructure projects. Roads, airports and broadband are all helpful but spending £20bn on infrastructure is a drop in the ocean compared to the £1.4trn deficit.

“We have to stop the cuts and start spending the money. It’s been a very miserable five years and nothing else has really worked. What is there left to do other than get back to government spending?”

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