Britain’s economy will grow far stronger than expected this year, finance minister Philip Hammond said Wednesday, as the country readies to trigger its exit from the European Union.
With UK activity performing better than expected following its June referendum in favour of Brexit, Hammond said in a budget update the country’s gross domestic product growth would come in at 2.0 percent this year, much higher than the government’s previous 1.4-percent GDP forecast.
Highlighting however the uncertainty surrounding the UK economy as the country prepares to quit the EU, the earlier 1.4-percent forecast given in November was a sharp downgrade on a prior estimate of 2.2 percent.
“As we prepare for our future outside the EU we cannot rest on our past achievements,” Hammond told parliament Wednesday as he unveiled a series of measures, including new investment for British schools, as part of the government’s latest tax and spend plans.
“We must focus relentlessly on keeping Britain at the cutting edge of the global economy. The deficit is down, but debt is still too high. Employment is up, but productivity remains stubbornly low,” added the chancellor of the exchequer.
Hammond said UK growth would stand at 1.6 percent next year, down slightly on a prior official estimate of 1.7 percent.
And the Conservative government downgraded also its GDP forecasts for 2019 and 2020. The nation would however borrow far less this year than the amount predicted back in November.
Sterling, which has fallen sharply since the Brexit vote, enjoyed a bounce on Hammond’s revised estimates.
“The pound has risen off its lowest level against the US dollar since mid-January… after chancellor Philip Hammond announced upgrades to the GDP forecasts,” said David Cheetham, chief market analyst at XTB trading group.
“Hammond has also stated that public borrowing will decrease significantly in 2017 to £51.7 billion ($63 billion, 60 billion euros) from the £68 billion seen previously in another development that has caused a mildly positive reaction in sterling.”
The budget and latest economic forecasts come as Britain stands on the cusp of triggering Article 50 of the EU’s Lisbon Treaty by the end of March.
This starts a two-year withdrawal process, after which Britain will leave the European Union whether or not it has struck a deal on its future ties with the bloc.
– ‘Brighter future’ –
Prime Minister Theresa May has insisted that Britain will leave Europe’s single market or tariff-free zone in order to control EU immigration, thus delivering a so-called “hard” Brexit meaning the country will need a series of new trade deals globally.
“As we start our negotiations to exit the European Union, this budget takes forward our plan to prepare Britain for a brighter future,” Hammond told the House of Commons.
“It provides a strong and stable platform for those negotiations. It extends opportunity to all our young people. It delivers further public investment in our public services, and it continues the task of getting Britain back to living within its means.
“We are building the foundations of a stronger fairer more global Britain,” he added.
The government on Wednesday confirmed plans to pump more than £500 million into Britain’s education system, building new schools and renovating others.