United Kingdom watchdog puts Brexit war chest at £26.6b


Chancellor of the Exchequer Philip Hammond (picture) issued a fresh warning that leaving the European Union (EU) without a deal would damage the United Kingdom economy and leave people less well off.

The chancellor unveiled a lower growth forecast for 2019, cut to 1.2% from 1.6%.

He added: "I need to be straight with the House: a no-deal Brexit would deliver a significant short- to medium-term reduction in the productive capacity of the British economy".

"We estimate (treating loans partly as grants) could increase the structural budget deficit by around 12 billion pounds or 0.5 percent of gross domestic product in 2020-21", the OBR said. "The idea that some readily available fix to avoid the consequences of a no-deal Brexit is just wrong".

In documents released alongside Chancellor Philip Hammond's Spring Statement, the Office for Budget Responsibility (OBR) said growth in the United Kingdom and global economies had slowed since October's Budget, leading to a downgrade in its short-term forecasts.

For, despite Mr Hammond's bullishness about the robust of the economy compared to other G7 countries, the Chancellor could not gloss over the fact that economic growth this year has been reduced to 1.2 per cent - a significant downgrade - and that future improvements to the funding of schools and other key services, frequently and vociferously demanded by MPs of all parties, are contingent on a Brexit resolution of sorts.

On Tuesday, parliament rejected Prime Minister Theresa May's proposed Brexit plan for a second time, little more than two weeks before the scheduled date of departure from the EU.

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That raises the prospect that Brexit will be delayed, bringing relief to businesses but extending the uncertainty hanging over the economy.

However cumulative growth over the next five years is now expected to be slightly higher than it was at the Budget forecast.

Earlier yesterday, the government unveiled plans for temporary tariffs if the United Kingdom crashes out without a deal.

The Chancellor said there was "good news" on the public finances, with borrowing forecast to reach £13.5bn in 2023/24, its lowest level in 22 years.

He warned that Britain leaving the European Union without a deal would deliver a significant short-to-medium term hit to the productive capacity of the British economy while a Brexit deal could unlock more spending.

"In recent weeks survey indicators of current activity have weakened materially, in part reflecting heightened uncertainty related to Brexit", the OBR said.

"That is not what the British people voted for in June 2016", he said.