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United Kingdom watchdog puts Brexit war chest at £26.6b

16 March 2019

The chancellor said he intends to launch a full three-year Spending Review "before the summer recess" in order "to be concluded alongside an Autumn Budget".

"Last night's vote leaves a cloud of uncertainty hanging over our economy", Hammond said in Parliament.

Lawmakers were expected to vote later on Wednesday against a leaving the European Union without a transition deal, then vote on Thursday on seeking a delay to Britain's departure, now scheduled for March 29.

The growth prediction for 2020 was kept at 1.4%, and the OBR sees an acceleration in the following year.

But the OBR also warned that a disorderly no-deal would pose a risk to the predicted growth rates, as the numbers are based on an assumed scenario in which the United Kingdom leaves the European Union with a deal on March 29, and enters a transition period.

Hammond also unveiled revisions to United Kingdom economic growth forecasts from the Office for Budget Responsibility, including reducing this year's estimate to just 1.2%.

He added: "I need to be straight with the House: a no-deal Brexit would deliver a significant short- to medium-term reduction in the productive capacity of the British economy".

He said that it was "disappointing" that the chancellor had missed the opportunity to provide desperately-needed funding for local services, and added that Brexit can not be a distraction from the challenges facing our public services.

Philip Hammond vowed to free up more money to help end austerity in a "deal dividend".

Theresa May's chancellor has broken ranks to suggest she should back a softer Brexit which can win Labour backing after her deal suffered a second crushing defeat in the Commons.

He said Britain's public debt was set to fall sustainably "for the first time in a generation". Accordingly, we think that a turning point has been reached: "fiscal policy no longer will dampen the economy, strengthening the case for the Monetary Policy Committee to raise interest rates shortly after the economic disruption created by Brexit uncertainty has faded".

"I'm confident that we're going to do a deal", Hammond said on Brexit.

"While in theory this should give the Chancellor greater wriggle room, he was at pains to point out that the purse strings won't be loosened until there is greater clarity around the UK's future relationship with the EU".

The CBI's chief economist, Rain Newton-Smith, said it was an "admirable attempt to set out a long-term vision for the United Kingdom economy" against a hugely uncertain political backdrop.

United Kingdom watchdog puts Brexit war chest at £26.6b