Chancellor of the Exchequer Philip Hammond didn’t mention Brexit once in his Autumn Statement. For the first time since the Leave vote, however, official figures released today with his speech show that Brexit is hitting the UK economy hard.
The Office for Budget Responsibility (OBR), the official independent budget watchdog, says that Brexit will increase government borrowing by £58.7bn between now and 2020-21, or £226m a week (see table 1.4). The comparison is not exact, but it’s an instructive contrast with the £350m a week that Brexiters falsely claimed the UK pays to the EU.
What’s more, instead of the budget being in surplus by £11bn in 2020-21 it is forecast to be in deficit by £20.7bn – a £32bn deterioration. According to the OBR, £15.2bn – or about half of the deterioration – could be due to Brexit.
One reason for the worsening budget position is that the economy will be 1.4% smaller in five years time than forecast in March.
In the short term the economy is expected to expand a bit faster than expected. The growth forecast for 2016 has been raised from 2% in March to 2.1% now. Hammond looked almost excited when he declared that the UK would have the fastest growing economy this year of any major industrial country. But the OBR has downgraded growth in 2017 from 2.2% to 1.4%. The economy is expected to pick up in the three years after that, but the outlook is more than usually uncertain.
We don’t of course know the full economic impact of Brexit yet. That might take a decade and will depend heavily on the deal eventually reached with the EU. But Hammond will not be able to avoid using the B word forever.
Edited by Hugo Dixon