U.K.'s Hammond Announces Sharp Cuts to Economic Forecasts -- Update

By Jason Douglas Features Dow Jones Newswires

U.K. Treasury chief Philip Hammond on Wednesday presented gloomier forecasts for the economy, in a budget address to Parliament that earmarked an extra GBP3 billion ($3.97 billion) over the next two years to prepare for the country's departure from the European Union.

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Presenting his latest tax-and-spending plans to lawmakers, Mr. Hammond also offered a variety of sweeteners to voters weary after years of government belt-tightening. A particular focus was the young: He pledged billions of pounds in tax breaks and government loan guarantees to spur housebuilding over the next five years amid concern over high prices, and said those between 26 and 30 years of age would get subsidized rail travel.

The pitch to voters represents an effort to revive the ruling Conservatives' fortunes after they lost their parliamentary majority in a snap election in June. Prime Minister Theresa May has since struggled to stamp her authority on a government roiled by resignations and riven by infighting over the terms of the U.K.'s departure from the EU.

Mr. Hammond sought to present an upbeat picture of the U.K.'s prospects after it leaves the EU in 2019, saying its economy is dynamic, innovative and poised to benefit from new technologies such as driverless cars and artificial intelligence.

"Those who underestimate Britain do so at their peril," he said.

But his tone contrasted with pessimistic forecasts for the economy produced by the Office for Budget Responsibility, the U.K.'s fiscal watchdog. The agency said it expects economic growth to slow from 1.5% this year to just 1.3% in 2019, compared with March projections of growth of 2% and 1.7%, respectively.

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The downbeat prognosis reflects a reassessment by the OBR of the U.K.'s prospects for productivity growth in the years ahead following repeated disappointments.

The GBP3 billion earmarked for Brexit preparations over the next two years is aimed in part at soothing Brexit supporters' concern that not enough is being done to prepare for a disorderly end to negotiations with the EU.

The money comes on top of some GBP700 million of funding provided to government departments to date. A Treasury spokesman said departments will be able to bid for the cash to finance new infrastructure needed after Brexit, such as immigration systems.

Write to Jason Douglas at jason.douglas@wsj.com

(END) Dow Jones Newswires

November 22, 2017 10:27 ET (15:27 GMT)