Britain's Hammond promises new economic plan to handle Brexit turbulence

Mon Oct 3, 2016 3:57am EDT
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By William James

BIRMINGHAM, England (Reuters) - Britain needs a new fiscal plan to navigate economic turbulence caused by Britain's vote to leave the European Union, finance minister Philip Hammond said on Monday, stressing the need to balance spending cuts with infrastructure investment.

On Sunday, Prime Minister Theresa May told the Conservative Party annual conference she would formally trigger the EU exit by the end of March next year, at which point Britain will enter into an initial two-year negotiating period.

Speaking ahead of his conference speech, Hammond said data from the first half of the year showed the economy was running at "eight out of 10", but that business and consumer confidence could suffer during the long Brexit process.

"We must expect some turbulence as we go through this negotiating process," Hammond told BBC television.

"There will be a period of a couple of years or perhaps even longer when businesses are uncertain about the final state of our relationship with the European Union and during that period we need to support the economy."

He reiterated his decision to push back the government's target to turn its 4 percent 2015/16 budget deficit - among the biggest of the world’s rich economies - into a surplus by 2020. He has yet to set a new target date.

In his speech due later on Monday, Hammond is due to say that while budgetary discipline remains crucial for the country, there is also a need to invest in building a fairer economy.

"The British people elected us on a promise to restore fiscal discipline, and that is exactly what we are going to do," he will say according to extracts from the text of his speech provided by his office.   Continued...

Britain's Chancellor of Exchequer Philip Hammond watches Prime Minister Theresa May speak at the annual Conservative Party Conference in Birmingham, Britain, October 2, 2016. REUTERS/Toby Melville