Philip Hammond, the U.K.’s newly appointed chancellor of the exchequer, said the vote to leave the European Union had “rattled confidence” and that he will take “whatever measures” needed to shore up the British economy.
“The number one challenge is to stabilize the economy, send signals of confidence about the future, the plans we have for the future to the markets, to business, to international investors,” Hammond said in a Sky News interview on Thursday.
Hammond’s comments came ahead of a meeting later the same day of Bank of England policy makers who will debate whether to reduce the key interest rate for the first time since 2009. The bank’s governor, Mark Carney, is seeking to stave off further turmoil after the pound plunged and consumer confidence dropped to a 21-year low in the wake of last month’s decision to quit the EU.
The chancellor, appointed to the role late on Wednesday by the U.K.’s new prime minister, Theresa May, will meet Carney Thursday morning “to make an assessment of where the economy is,” he said in a BBC TV interview. He added: “I think the governor of the Bank of England is doing an excellent job.”
Business Uncertainty
In what may be an early attempt to place blame for a slowing economy with his pro-Brexit colleagues, Hammond said that the prospect of EU negotiations was hurting confidence. “If there’s one thing that is damaging our economy right now, it is uncertainty for businesses,” he told the BBC.
Hammond said he was confident that London’s financial district would weather Brexit. “In the short term the City of London is highly resilient,” he told the BBC. “It is a very complex web of markets and supporting industries, legal services, business services. It isn’t so easy for anywhere else to set itself up as a credible alternative to the density of financial services and support services in the City of London.”
However, he urged newly-appointed Brexit Secretary David Davis to secure as much access to EU markets as possible. “We’ve got to make sure in our negotiations with the European Union we have very clearly in our minds the need to ensure access to EU single market for our financial services industries in London,” he said. “This is not only in London’s interest; it’s in the interest of the EU as well.”
Hammond, who was the U.K.’s foreign minister from 2014, would not comment on his predecessor George Osborne’s plan to cut the corporate tax rate to 15 percent and ruled out delivering an emergency budget. He said he’d deliver an autumn statement “in the normal way.”
Weak Demand
Prior to his time in government, as part of Cameron’s finance team in opposition, Hammond played a part in crafting Osborne’s austerity plan, leading to speculation among economists he may be more of a fiscal hawk than May.
“As a best guess, we will likely see a compromise,” said Kallum Pickering, an economist at Berenberg Bank. “Looser fiscal policy in the near term while demand is weak with the major cuts pushed to the back of the forecast when economic growth is likely to improve.”
Hammond signaled that deficit reduction may be less of a priority. “We’ve got to reduce the deficit further,” he said. “But looking at how and when and at what pace we do that, and how we measure our progress in doing that, is something we now have to consider in light of the new circumstances the economy is facing.”
