U.K. Cuts 2017 Growth Forecast and Plans to Increase Borrowing

• U.K. Cuts 2017 Growth Forecast and Plans to Increase Borrowing

U.K. Chancellor of the Exchequer Philip Hammond laid out a somber framework for post-Brexit Britain, slashing the forecast for economic growth in 2017 and saying the government will need to borrow more over the next five years partly as a result of the vote to leave the European Union.

Outlining his Autumn Statement to Parliament on Wednesday, five months to the day after Britain opted to quit the EU, Hammond said the Office for Budget Responsibility now sees economic growth next year of 1.4 percent instead of the 2.2 percent forecast in March. The cumulative budget deficit will also widen, with just under half the extra 122 billion pounds ($151 billion) foreseen through 2021 — 58.7 billion pounds — a direct result of the referendum result, the Treasury said in documents published to accompany Hammond’s statement.

The vote to leave the EU “will change the course of Britain’s history,” Hammond told the House of Commons. “But it’s a decision that also makes more urgent than ever the need to tackle our economy’s long-term weaknesses,” including a productivity gap, a housing shortage and a “damaging imbalance in economic growth and prosperity,” he said. “Our task now is to prepare our economy to be resilient as we exit the EU and match-fit for the transition that will follow.”

In his first budget statement since he was appointed by Prime Minister Theresa May in the wake of June’s Brexit vote, Hammond cited heightened economic uncertainty and a weaker pound for the clouded outlook. The OBR said the economy has less potential for sustainable growth as a result of the decision to quit the bloc.

The vote to leave the EU “will change the course of Britain’s history,” Hammond told the House of Commons. “But it’s a decision that also makes more urgent than ever the need to tackle our economy’s long-term weaknesses,” including a productivity gap, a housing shortage and a “damaging imbalance in economic growth and prosperity,” he said. “Our task now is to prepare our economy to be resilient as we exit the EU and match-fit for the transition that will follow.”

In his first budget statement since he was appointed by Prime Minister Theresa May in the wake of June’s Brexit vote, Hammond cited heightened economic uncertainty and a weaker pound for the clouded outlook. The OBR said the economy has less potential for sustainable growth as a result of the decision to quit the bloc.

The government is no longer trying to deliver a budget surplus by 2020, Hammond said, but he pledged to “balance the books” early in the next parliamentary term from 2020 to 2025.

“A credible fiscal policy remains essential for maintaining market confidence and restoring the economy to long-term health,” Hammond said. “The prime minister and I remain 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.”