Britain eyes higher growth in Brexit year

Britain on Monday ramped up its economic growth outlook for next year, when the country will exit the European Union, in an upbeat budget that vowed to boost spending after a decade of painful austerity.

The economy will grow 1.6% in 2019, up from the Conservative government’s prior forecast of 1.3%, finance minister Philip Hammond revealed in his last annual budget before Britain’s EU departure in March.

However, with London deadlocked in trade talks with Brussels and investors fearful of a chaotic no-deal Brexit, Hammond downgraded 2018 growth guidance to 1.3% from 1.5%.

Hammond confirmed that a disorderly Brexit would spark a new budget sooner than expected.

The chancellor of the exchequer insisted that the nation’s “resolute” focus was to prosper outside the EU following its departure on March 29, adding that the austerity era begun at the height of the global financial crisis in 2008 was “finally coming to an end”.

Hammond told Parliament: “Our economy continues to confound those who talk it down — and we continue to focus resolutely on the challenges and opportunities that lie ahead, as we build a new relationship with our European neighbours; a new future outside the European Union.”

Britain has been on a strict diet of austerity measures that curbed spending and raised taxes in the wake of the financial crisis.

‘Higher Brexit fund’

With much uncertainty surrounding Britain’s EU exit, Hammond said the government was increasing its Brexit preparation fund to £4.2-billion ($5.4-billion), a hike of half a billion pounds.

London and Brussels remain locked in negotiations and it is still uncertain whether Prime Minister Theresa May can get an eventual deal with the EU backed by lawmakers.

The Northern Irish party propping up her government said Monday that it would support the latest budget but could still rebel should May strike a Brexit deal it dislikes.

The Democratic Unionist Party (DUP) said it would be “reckless” to follow through on a threat to vote down the budget on the basis of a withdrawal agreement that had not yet been struck with the European Union.

The DUP fears May could agree to new barriers on trade between Northern Ireland and the rest of Britain after Brexit, as the only way of achieving her stated goal of avoiding checks with EU-member Ireland.

Deadlock with Brussels over how to keep the Irish border open is holding up a final deal, just five months before Britain is due to leave the EU.

Public spending

On the domestic front, Hammond loosened the purse strings Monday, with the announcement of a multi-billion-pounds increase in funding for the state-run National Health Service (NHS) over the next five years.

At the same time, he plans to introduce a new digital services tax aimed at tech giants from 2020, responding to public outrage over low tax payments by the likes of Amazon, Facebook and Google.

“It is only right that these global giants with profitable businesses in the UK pay their fair share,” Hammond told lawmakers in a move aimed at helping also British businesses struggling against fierce online competition.

Prior to the budget, Hammond had already announced £900-million in relief for the annual fees small store owners pay on their retail space.

© Agence France-Presse

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Roland Jackson
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Ben Perry
Ben Perry works from UK. Financial journalist @AFP, tweets mostly a mix of finance and football Ben Perry has over 226 followers on Twitter.

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