Britain’s economy will face sluggish growth in the coming years on the back of Brexit fallout, finance minister Philip Hammond revealed Tuesday in a key budget update.
Gross domestic product (GDP) is projected to grow 1.5 percent this year, Chancellor of the Exchequer Hammond said, hiking prior guidance of 1.4 percent thanks to increasing productivity and the strong world economy.
The new 2018 forecast remains a slowdown, however, compared with 1.7-percent expansion last year, and followed a gloomy OECD warning that Brexit would crimp growth over the next few years.
And in a new twist, the Office for Budget Responsibility (OBR) fiscal watchdog announced that Britain’s so-called “Brexit bill” — or the final divorce settlement that London will pay Brussels to sever ties with the European Union in a year’s time — was estimated at £37.1 billion (42 billion euros, $52 billion).
This is in line with a Treasury estimate given last year of between £35 billion and £39 billion.
The OBR also projected that Britain would continue to pay the divorce bill until the year 2064, although the bulk would be paid over the next five years.
Britons voted in a shock referendum in 2016 to leave the European Union, despite warnings from some quarters that it would negatively impact growth.
“The vote to leave the European Union appears to have slowed the economy, but by less than we expected immediately after the referendum,” the OBR said in a statement published alongside the budget update.
The economy was proving resilient “thanks in part to the willingness of consumers to maintain spending by reducing their saving”, it added.
Separately on Tuesday, the Organisation for Economic Cooperation and Development (OECD) forecast that Britain would miss out on buoyant global economic growth over the next two years.
The OECD edged up its 2018 Britain forecast by a tenth of a percentage point to 1.3 percent, but froze its 2019 guidance at 1.1 percent expansion. It blamed high inflation dampening consumer demand and continued uncertainty about Brexit.
London has urged Brussels to help negotiate a wide-ranging post-Brexit free trade deal, but the bloc insists there will be no “cherry picking” for the UK.
Glossing over the uncertainty, Hammond told lawmakers: “I am pleased to report… on a UK economy that has grown in every year since 2010.”
But the pace of growth was expected to slow further in 2019.
Britain’s scheduled departure from the EU is set for March of the same year.
Hammond said Tuesday growth would stand at 1.3 percent in both 2019 and 2020, unchanged from previous forecasts. It would then pick up to 1.4 percent in 2021 and 1.5 percent in 2022.
Prime Minister Theresa May’s Conservative government has made “solid progress towards building an economy that works for everyone”, the chancellor continued.
Opposition Labour finance spokesman John McDonnell however accused Hammond of “astounding” complacency over the impact of ongoing state austerity on public services.
“We face in every public service a crisis on a scale we’ve never seen before,” McDonnell said.
But Hammond added that the latest official forecasts predicted “more jobs, rising real wages, declining inflation, a falling deficit and a shrinking debt”.
Debt was set to drop as a share of GDP from 2018/2019 and the OBR has revised down both debt and borrowing in every year.
Borrowing is now forecast to be £45.2 billion in the current financial year that runs to April 2018 — £4.7 billion lower than forecast in November.
Hammond added that the borrowing forecasts confirmed “the first sustained fall in debt for 17 years, a turning point in the nation’s recovery from the financial crisis of a decade ago”.