The UK could unleash a government stimulus package this autumn to counter the negative effects of its vote to leave the EU, British Chancellor of the Exchequer Philip Hammond said yesterday.
“We have the option of a fiscal response, and we will do that on our normal timetable around the autumn statement,” Hammond told reporters on the sidelines of a G20 Ministers of Finance meeting in Chengdu, China.
His remarks came after closely watched survey data on Friday showed that Britain’s economy was battered by the Brexit vote last month and faced a “dramatic deterioration” in activity.
Hammond said the private sector business activity figures “underscore the hit to confidence from the uncertainty that the referendum decision has created.”
“The reality is that there will be a measure of uncertainty right up to the conclusion of our negotiations with the European Union,” Hammond added.
There is a two-year window for negotiations from when Britain triggers the Article 50 clause, something which new British Prime Minister Theresa May has signaled she might not do until next year.
However, Hammond added: “The uncertainty will only end when the deal is done.”
He said that Brexit had been a “major topic of discussion” at the G20 meeting, where finance chiefs from some of the world’s most powerful nations and major emerging countries said that Brexit was a risk to global economic growth.
Hammond would not give details on the possible stimulus. Governments typically increase spending during recessions to balance plummeting private sector activity.
Economic data available in the autumn would allow London “to reach a proper conclusion as to whether a fiscal stimulus is required,” he said.
Britain’s ruling Conservative party abandoned its policy of reaching a budget surplus by 2020 following the shock Brexit vote, potentially freeing up funds for spending.
Hammond said a “new framework” for Britain’s budget would be released in the autumn to “give clarity to investors,” without giving details.
A plunging pound following the Brexit vote has made British assets cheaper for some foreign investors, and Japan’s SoftBank Corp said last week it would buy British iPhone chipmaker ARM Holdings PLC for US$32 billion.
Hammond said he was interested in drumming up more foreign investment, including from China.
However, he said overseas firms should make a “long-term commitment,” and that he was “skeptical of asset stripping.”
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