Friday

20th Jul 2018

Brexit to hike British debt by €69bn

  • British government will have to maintain austerity in the light of Brexit costs (Photo: Jaypeg)

Britain’s decision to exit the EU is to prompt €69 billion (£59bn) of extra borrowing, a UK watchdog has said, leaving poorer families less well off.

The Office for Budget Responsibility (OBR), a fiscal watchdog created six years ago, said in London on Wednesday (23 November) that the extra money would be needed over the next five years.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... our join as a group

“The economy has not slowed as sharply as some forecasters feared in the wake of the referendum vote to leave the European Union, but it has slowed, and the outlook is weaker”, the OBR’s chairman, Robert Chote, said.

“We expect the quarterly growth rate of GDP to continue slowing into next year, as uncertainty over the UK’s future trade and migration regime delays business investment and as the fall in the pound squeezes real consumer spending by pushing up inflation”, he added.

The OBR had predicted growth of 2.2 percent in 2017 prior to the Brexit vote, but now forecast just 1.4 percent. It said Brexit would probably wipe out 2.4 percent of potential growth over the next five years.

That meant that the British treasury would have to abandon previous fiscal targets, the OBR said, with public debt expected to peak at 90 percent of GDP next year and with the budget deficit to remain high at 3.5 percent of GDP.

The OBR also said that “the negotiation of new trading arrangements with the EU and others” would “slow the pace of import and export growth for the next 10 years”.

Philip Hammond, the British treasury chief, told parliament the same day that he would have to continue welfare cuts in light of the figures.

He said he could only afford modest handouts to “just about managing families” and that he might have to “review” other promises on pensions.

He also said British workers would have to strive harder to compete with EU firms.

The Brexit vote “makes more urgent than ever the need to tackle our economy’s long-term weaknesses”, he said.

“In the real world, it takes a German worker four days to produce what we make in five … That has to change”, he said.

He told MPs that the British economy had “confounded commentators at home and abroad with its strength and its resilience” since the Brexit referendum in June, however.

He also indicated that Britain would maintain defence and development aid spending at current levels.

“We will meet our commitments to protect the budgets of key public services and defence. We will keep our promise to the world’s poorest”, the chancellor said.

“We are a great nation … Confident in our strengths,” he added.

Opposition MPs, such as Ed Miliband, the former leader of the opposition Labour Party, sad the OBR forecast was a “salutary warning” of what to expect if the UK failed to negotiate good terms with the EU.

“Isn’t it a very strong argument for us to remain as close as possible to our largest trading area, the single market, and inside not outside the customs union?”, Miliband said.

John McDonnell, Labour’s shadow chancellor, said the rising debt and welfare cuts showed the government’s “abject failure” to handle the situation.

The UK has pledged to start EU exit talks at the end of March in a process that is to last at least two years.

The government’s lack of clarity on whether it would stay in the single market or make a “hard exit” in order to curb EU immigration has also prompted criticism.

The OBR, on Wednesday, asked for “a formal statement of government policy as regards its desired trade regime and system of migration control”.

The Irish economy is also expected to suffer Brexit fallout.

The Economic and Social Research Institute, a think tank in Dublin, said on Wednesday that Irish exports to the UK would fall steeply if Brexit led to new UK-EU trade tariffs.

It said Irish exports to the UK, especially in the food sector, could drop by up to 30 percent.

It said overall exports would be likely to fall by 4 percent a year, resulting in an annual cash loss of €4.5 billion.

Britain can't pick and choose Brexit deal, MEPs say

Leaders of the European Parliament said they won't accept any deal that hurts the free flow of people within the EU single market after their first meeting with British Brexit minister, David Davis.

Magazine

Brexit by accident

The British vote to leave the EU was, in large part, the product of neglect and circumstance. But it is also too late to put the genie back in the bottle.

EU urges no-deal Brexit preparation

The EU Commission urged companies, citizens, and member states to prepare in case the UK next March crashes out of the EU without a deal - on the day the new UK Brexit minister arrived in Brussels.

May avoids defeat in key Brexit bill

The British prime minister escaped defeat again in parliament, as EU governments question her ability to ratify any Brexit deal by Westminster.

May avoids defeat in key Brexit bill

The British prime minister escaped defeat again in parliament, as EU governments question her ability to ratify any Brexit deal by Westminster.

News in Brief

  1. Italy's Salvini to sue critical anti-mafia writer
  2. EU countries send aircraft to Sweden to help with wildfires
  3. British ex-commissioner's jobs called into question
  4. May to tell EU to drop Irish border 'backstop' idea
  5. Trump threatens EU over Google fine
  6. Spain withdraws arrest warrant for Catalan separatists
  7. EU readies counter-measures on possible US car tariffs
  8. EU Commission launches probe into Hungary's 'Stop Soros' law

Stakeholders' Highlights

  1. IPHRCivil society asks PACE to appoint Rapporteur to probe issue of political prisoners in Azerbaijan
  2. ACCASocial Mobility – How Can We Increase Opportunities Through Training and Education?
  3. Nordic Council of MinistersEnergy Solutions for a Greener Tomorrow
  4. UNICEFWhat Kind of Europe Do Children Want? Unicef & Eurochild Launch Survey on the Europe Kids Want
  5. Nordic Council of MinistersNordic Countries Take a Stand for Climate-Smart Energy Solutions
  6. Mission of China to the EUChina: Work Together for a Better Globalisation
  7. Nordic Council of MinistersNordics Could Be First Carbon-Negative Region in World
  8. European Federation of Allergy and AirwaysLife Is Possible for Patients with Severe Asthma
  9. PKEE - Polish Energy AssociationCommon-Sense Approach Needed for EU Energy Reform
  10. Nordic Council of MinistersNordic Region to Lead in Developing and Rolling Out 5G Network
  11. Mission of China to the EUChina-EU Economic and Trade Relations Enjoy a Bright Future
  12. ACCAEmpowering Businesses to Engage with Sustainable Finance and the SDGs

Stakeholders' Highlights

  1. Nordic Council of MinistersCooperation in Nordic Electricity Market Considered World Class Model
  2. FIFAGreen Stadiums at the 2018 Fifa World Cup
  3. Mission of China to the EUChina and EU Work Together to Promote Sustainable Development
  4. Counter BalanceEuropean Ombudsman Requests More Lending Transparency from European Investment Bank
  5. FIFARecycling at the FIFA World Cup in Russia
  6. Nordic Council of MinistersOECD Report: Gender Equality Boosts GDP Growth in Nordic Region
  7. Centre Maurits Coppieters“Peace and Reconciliation Is a Process That Takes Decades” Dr. Anthony Soares on #Brexit and Northern Ireland
  8. Mission of China to the EUMEPs Positive on China’s New Measures of Opening Up
  9. Macedonian Human Rights MovementOld White Men are Destroying Macedonia by Romanticizing Greece
  10. Counter BalanceControversial EIB-Backed Project Under Fire at European Parliament
  11. Nordic Council of MinistersIncome Inequality Increasing in Nordic Countries
  12. European Jewish CongressEU Leaders to Cease Contact with Mahmoud Abbas Until He Apologizes for Antisemitic Comments

Join EUobserver

Support quality EU news

Join us