Chancellor sets out plan “to prepare our economy to be resilient as we exit the EU” in Autumn Statement
24 November 2016
In yesterday’s Autumn Statement, Chancellor Philip Hammond said, “Our task is now to prepare our economy to be resilient as we exit the EU and match-fit for the transition that will follow.” Hammond said that debt is forecast to rise, peaking in 2017/18 at 90.2% of GDP, before falling again in 2018 to 89.7%, and that “net borrowing as a percentage of GDP will fall from 4% last year to 3.5% this year, and will continue to fall over the Parliament, reaching 0.7% in 2021-22.” The Office for Budget Responsibility (OBR) said increased uncertainty and higher inflation would depress UK GDP growth to 1.4% in 2017, below the March forecast of 2.2%, but Hammond said that the growth rate was “still equivalent to the IMF’s forecast for Germany, and higher than the forecast for growth in many of our European neighbours, including France and Italy.”
Elsewhere in the statement, Hammond pledged £23bn over the next five years to a new National Productivity Investment Fund, £2.3bn for a Housing Infrastructure Fund, and a £1.4bn for affordable housing. He also confirmed the Prime Minister’s announcement earlier this week that the Government will invest an extra £2bn annually in research and development by 2020/21.
On Brexit, Hammond said, “While the OBR is clear that it cannot predict the deal the UK will strike with the EU, its current view is that the referendum decision means that potential growth over the forecast period is 2.4 percentage points lower than would otherwise have been the case.” Separately, a member of the Bank of England’s Monetary Policy Committee, Kristin Forbes, commented, “Despite this heightened discussion about uncertainty, UK economic performance has been solid.”
Meanwhile, Open Europe’s Acting Director Stephen Booth gave evidence yesterday to the House of Commons’ Exiting the European Union Committee on the UK’s negotiating objectives for its withdrawal from the EU. In a view cited by The Express, he said that the UK was likely to leave the customs union and the single market and therefore the long-term UK-EU relationship would either be conducted under a bilateral trade agreement or on World Trade Organisation terms. In a separate statement yesterday, the Economic and Social Research Institute (ESRI) warned that Irish exports to the UK could fall by more than 30% if the UK leaves the EU without a bespoke trade deal.
Separately, the head of Open Europe’s Brussels office, Pieter Cleppe, discussed Belgian Prime Minister Charles Michel’s meeting with Theresa May on Belgian Radio 1, saying “Given how a bad deal for Britain would entail tariffs and thus also job losses, quite a few jobs on mainland Europe would be lost, so it’s in both sides’ interest to secure a friendly Brexit.”
IMF deputy head more worried by slow European growth than Brexit
David Lipton, the First Managing Director of the IMF, has told The Telegraph that “Brexit is going to prove complex, time consuming and could well be reasonably adverse for the UK and Europe, but it’s not at the top of my worry list,” adding, “I worry more about the challenge of Europe dealing with its growth, or the legacies of crisis and the need for continued architectural improvements, including completing the banking union which has advanced substantially but remains incomplete.” However, he warned, “Britain, by leaving the EU, needs more than ever to be connected elsewhere, especially if you are going to have a rocky road towards a new set of procedures for trading in Europe, you’re going to have to find other trading partners.”
Source: The Daily Telegraph
NATO chief praises UK as Merkel says Germany is not meeting “expectations of our NATO partners” on military spending
Jens Stoltenberg, the Secretary General of NATO, praised the UK’s commitment to NATO at a meeting with Theresa May yesterday, saying, “You lead by example. It’s good to see that other allies are now following you and they are starting to increase defence spending. More defence spending in Europe is important for the transatlantic bond, for fair burden-sharing between Europe and the United States.” May said, “The UK wants to remain the cornerstone of the alliance.”
Separately, German Chancellor Angela Merkel said yesterday, “Our defense budget shows that we haven’t reached the point where we should be if we talk about the expectations of our NATO partners,” adding, “I know we still have a pretty long way to go to reach NATO’s 2 percent target for defense spending and I can’t promise we will get there in near future. But the direction has to be clear (…) that we approach this target and implement it.”
Martin Schulz will leave European Parliament presidency to stand as German MP candidate next year
European Parliament President Martin Schulz has this morning confirmed that he will quit his current post to stand as a candidate to become a German MP in next year’s federal election. Schulz will head the centre-left SPD’s list of candidates in the German state of North-Rhine Westphalia.
Poll: 57% of Scots would prefer to be outside EU and maintain border-free trade with rest of UK
A BMG poll for The Herald found that 43% of Scots would accept Scotland remaining inside the EU if this meant a ‘hard’ border with the rest of the UK. However, 57% would prefer Scotland to be outside the EU if that meant it could retain free trade and open borders with England, Wales and Northern Ireland.
Source: The Herald
CBI sees UK factories perform better than expected but weak pound proves a drag
The latest CBI Industrial Trend survey shows that manufacturers have posted their best month for orders since the UK’s vote to leave the EU in June. Overall order books picked up in November, with the total orders balance rising from -17 in October to -3. The reading was above the forecasts of -8 as well as the survey’s long-run average of -15. Rain Newton-Smith, the CBI’s chief economist said, “It’s good to see manufacturers’ overall order books at healthy levels, and the outlook for output growth remaining robust as we head into Christmas. But the weak pound is beginning to make its mark and prices are expected to rise, especially in the food and drink sector. On the flip side, export orders remain above average.”
Meanwhile, Justin King, the former head of Sainsbury’s, and Ian Wright, director general of the Food and Drink Federation, warned that food prices are likely to rise next year by “at least” 5% due to the fall in the pound following the Brexit vote causing a “profound change” for supermarkets.
Separately, President of the German Automotive Industry Association Matthias Wissmann has told the BBC, “We need, relatively soon, a clear answer … Will we have tariff and non-tariff barriers between Britain on the one hand and the European Union?” He added that trade barriers would mean “a long period of uncertainties that will block future investments in Britain, and that makes me really concerned.”
Russian fuel shipments “keep Assad’s air assets operational” in violation of EU sanctions, say Reuters sources
Reuters reports on evidence provided by, amongst others, an EU member-state intelligence source that suggests Russia is sanction-busting by shipping jet fuel to Syria through EU waters in order to “keep [Syrian President] Assad’s air assets operational.” At least two Russian tankers, named as the Yaz and the Mukhalatka, were reported to have stopped in Greece and Cyprus en route to Syria, and Reuters’ sources estimate that over two weeks in October 20,000 metric tonnes of fuel to a value of about $9m was shipped.