World Economy

UK Slashes Growth Projections

UK Slashes Growth ProjectionsUK Slashes Growth Projections

Britain slashed its official projections for economic growth Wednesday and anticipates it will need to borrow sharply over the coming years.

Finance Minister Philip Hammond delivered the UK government’s official autumn budget at a time when the ruling Conservative party is facing challenging political and economic circumstances, CNBC reported.

The non-partisan Office for Budget Responsibility forecast Britain’s gross domestic product would grow by 1.5% in 2017 before slipping gradually to 1.3% over the next three years. The UK had been forecast to grow by 2% in 2017.

The OBR also revised down productivity growth and business investment. Britain’s changing economic condition has stirred fierce debate over how much should be attributable to the uncertainty surrounding Brexit.

Hammond promised to set aside £3 billion ($3.9 billion) over the next two years for Brexit contingency planning. “The negotiations on our future relationship with the European Union are in a critical phase,” Hammond said. “We have already invested almost £700 million in Brexit preparations and today I am setting aside over the next two years another £3 billion,” he added.

Britain’s finance minister had been facing mounting pressure ahead of the budget speech, with lawmakers from all sides urging him to increase spending amid austerity fatigue from the British electorate.

The OBR—an organization that is a non-departmental public body that gives estimates to the finance ministry—said annual borrowing would be around £49.9 billion in 2017, more than £8 billion lower than forecast in March.

On debt, the OBR said it would peak at 86.5% of GDP this year, before falling over subsequent years to 79.1% by 2023. “We understand the frustration of families where real incomes are under pressure,” Hammond said, as he welcomed the OBR’s forecast of debt as a share of GDP falling over the coming years.

On Tuesday, figures from the Office of National Statistics showed Britain’s deficit rose to £8 billion last month—a rise of nearly 7% when compared to the same period a year earlier. Analysts had anticipated a figure of around £7 billion.

The widening budget deficit, which is the gap between government spending and tax receipts, pointed to a weaker picture than previously thought for the UK’s public finances.

Add new comment

Read our comment policy before posting your viewpoints