Economy facing two years of Brexit ‘turbulence’, warns chancellor Hammond

Chancellor Philip Hammond in Downing Street, in Westminster, London. Picture: Andrew Matthews/PA Wir

Chancellor Philip Hammond in Downing Street, in Westminster, London. Picture: Andrew Matthews/PA Wire - Credit: PA

Britain's economy is heading for a 'rollercoaster' ride over the coming two years or more during negotiations to leave the European Union, Chancellor Philip Hammond has warned.

Mr Hammond said the expected 'turbulence' has forced him to tear up predecessor George Osborne's plan to bring the national finances into surplus by the end of the decade.

He confirmed that his Autumn Statement in November will set out a fresh policy framework to fit the new circumstances which Britain faces, allowing the Government greater scope to borrow for investment to shore up the economy.

But he insisted this did not mean an end to austerity, with the new plan continuing the 'task of fiscal consolidation' begun under Mr Osborne and maintaining controls on public spending in order to ensure that Britain lives within its means.

Mr Hammond was speaking a day after Prime Minister Theresa May announced that the two-year process of negotiating Brexit under Article 50 of the EU treaties will start by the end of March 2017.

And she put Britain on course for a 'hard Brexit' without full access to the European single market by making clear she will not accept a deal which limits the UK's ability to control immigration.

The Chancellor told BBC1's Breakfast: 'We must expect some turbulence as we go through this negotiating process. There will be a period of a couple of years or perhaps even longer when businesses are uncertain about the final state of our relationship with the European Union.

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'During that period, we need to support the economy to make sure that consumer confidence remains, to make sure that business confidence is stable, so that we get the investments that keeps the jobs that keep Britain going.

'That's my challenge as we go through this period.'

Mr Hammond said: 'I'm absolutely in favour of trying to get this deal done as quickly as possible, because the sooner it's done, the sooner we restore certainty to our economy and allow businesses to start investing with confidence for the future.

'But I think we must go into this negotiating period with a realistic expectation of the turbulence that there could be during the negotiations. People will be speculating - one day it's going very well, one day it's not going so well.

'We have to expect a period when confidence will go up and down - perhaps on a bit of a rollercoaster - until we get to a final agreement, where businesses and consumers can understand what the future relationship between Britain and the European Union will be.'

Mr Hammond declined to say whether he expected Britain to retain full access to the single market, insisting it would undermine the Government's negotiating position if it provided a 'running commentary' on its negotiating position.

He said the Government was going in to negotiations - due to be complete by the spring of 2019 - in a 'spirit of determination' to get a good deal for Britain.

But he warned: 'We won't control that process, because we have 27 negotiating partners on the other side.'

Data since the June 23 referendum have shown that the UK economy is 'very strong going into this period', said Mr Hammond, adding: 'The stronger we are going into it, the greater the chance of maintaining growth and maintaining stability throughout the period.'