The UK economy is set to fall to 1.4 per cent in 2017 as the Brexit effect kicks in, the Office for Budget Responsibility has forecast.
Philip Hammond, the Chancellor, revealed the figures during his Autumn Statement.
Growth is expected to be 1.7 per cent in 2018-19, 2.1 per cent in 2019-20 and 2 per cent in 2021. Growth this year was slightly above expectations, at 2.1 per cent.
But while the OBR expects the UK to keep growing, Hammond acknowledged growth would be 2.4 percentage points lower because of Brexit.
He said the lower growth in 2017 is due to lower investment and weaker consumer demand “driven respectively by greater uncertainty and higher inflation driven by sterling depreciation”.
Hammond praised his predecessor, George Osborne, but noted: “My style, of course, will be different to his.”
He confirmed plans to drop the surplus target: “We no longer seek to deliver a surplus in 2019-2020. but the Prime Minister and I remain firmly committed to seeing the public finances return to balance as soon as is practicable, while leaving enough flexibility to support the economy in the near term.”
At the March budget, Osborne, then the Chancellor, said the economy would grow more slowly than had been predicted at the Autumn Statement in 2015.
In March, the Office for Budget Responsibility revised its forecast downward to 2 per cent, from 2.4 per cent. It predicted growth of 2.2 per cent in 2017, and 2.1 per cent in 2018. The new forecast is significantly lower.