UK showed resilience post-Brexit vote – Chancellor P.Hammond

Phillip Hammond, Chancellor of the Exchequer, said in the Autumn Budget Statement that the UK has shown signs of resilience since the Brexit vote late in June, adding that the decision to leave the EU implies that the UK must take fiscal imbalances.

In addition the Office for Budget Responsibility (OBR) updated its GDP forecasts, now seeing the economy expanding 2.1% in 2016, 1.4% in 2017 and 1.7% in 2018.

Hammond said BoE measures have supported growth after Brexit vote, while he added that a credible fiscal policy is needed in order to sustain confidence.

The Chancellor argued that the UK abandons surplus target in 2019-20, and he expects to return to a balanced budget as early as possible in the next parliament.

He forecasts 2016-17 deficit at £68.2 billion, 2017-2018 at £59 billion and 2018-19 at £21.9 billion. He said the plan is to add £122 billion in planned borrowing  over the next 5 years, while the underlying debt should peak at 82.4% this year and over 90% in 2017.

In order to boost productivity, Hammond said the UK will prioritize investment in infrastructure and innovation, funded through combined tax and spending measures. A ‘national productivity investment fund’ will be formed.

GBP/USD tested highs near 1.2440 on the statement, coming back to the 1.2420 area at the time of writing.