Home news Not much Chancellor can do about Brexit fears

Not much Chancellor can do about Brexit fears


Try, for a moment, to put yourself in Philip Hammond’s shoes.

The economy is growing at an anemic rate – 0.2% in the first quarter and 0.3% in the second. That’s less than half the rate one might previously have considered normal.
:: Sluggish growth continues for economy
That weak growth, as the Chancellor told me, is partly down to Brexit – the nervousness faced by businesses and consumers, unsure of our future relationship with the EU and unwilling to invest as much as they would have done.
And yet, despite wanting to tell businesses that they will have a transition period – something to ease the shift from being inside to being outside the EU – he simply can’t.
In his words, he “can’t give a cast iron guarantee” – because Britain has yet to agree to a transition with its European counterparts.
It is an invidious situation.
On the bright side, the UK economy is not mired in the recession some economists feared after the referendum.

Image: The second quarter performance was underpinned by the services sector
But annual growth of less than 2%, which is what the IMF now expects for the UK, implies Britons feeling the pinch for many more months.
Indeed, having been the industrialised world’s fastest growing economy before the vote, it is now one of the weaker performers.

And yet because government has been effectively paralysed by Brexit, and because the negotiations are only now creaking into action, there is little he can do to try to relieve that uncertainty.
No wonder he told me that talks over the so-called “implementation period” should be the first thing on the agenda in Brussels.
Still, it’s a reminder of how much things have changed for UK economic policymaking in the past few months.
Remember: Britain has plenty of challenges not related to Europe.
Productivity is weak – real wages were squeezed well before one considers the post-vote period – and there are worries that the UK is punching below its weight on innovation and industrial policy.
And yet because of the referendum – and then June’s election – the Chancellor has little realistic prospect of imposing major reforms on the UK economy.
He can’t even guarantee the implementation period he and business want – despite having (eventually) persuaded his Brexiteer cabinet colleagues that it’s necessary.
A tough spot to be in. Then again, no one said this would be easy.

Source: SKY