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UK growth seen to slow sharply in 2017
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BREXIT will cause Britain’s economic growth to slow sharply and blow a hole in government finances that will require it to borrow an extra 122 billion pounds (US$151 billion) over five years, a gloomy budget update revealed yesterday.
The budget black hole covers the period until early 2021, according to official forecasts.
The nation’s shock June 23 vote to leave the European Union will “change the course of Britain’s history,” Chancellor of the Exchequer Hammond said in his Autumn Statement exactly five months after the referendum.
Brexit “makes more urgent than ever the need to tackle our economy’s long-term weaknesses,” he added.
Gross domestic product was expected to grow by only 1.4 percent next year — sharply down from the prior estimate of 2.2 percent given in March.
“That is slower of course than we would wish, but still equivalent to the IMF’s forecast for Germany, and higher than the forecast for growth in many of our European neighbors including France and Italy,” Hammond told lawmakers.
He noted, however, that the UK economy was predicted to have grown by 2.1 percent this year, up from the government’s previous estimate of 2 percent.
In a keenly awaited budget, he unveiled a package of UK-wide investment projects, including the building of homes and road improvements.
Hammond also raised the country’s minimum wage level and hiked tax thresholds to give workers more take-home pay.
While viewed as a government attempt to trim of years of austerity triggered by the 2008 global financial crisis, Hammond confirmed he had abandoned predecessor George Osborne’s aim of a budget surplus by 2019/20.
“In view of the uncertainty facing the economy, and in the face of slower growth forecasts, we no longer seek to deliver a surplus in 2019/20,” Hammond said.
But the government remains “firmly committed to seeing the public finances return to balance as soon as practicable, while leaving enough flexibility to support the economy in the near term,” he added.
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