Business investment ‘signficantly’ lower due to Brexit uncertainty, warns Philip Hammond
Business investment is “significantly” lower due to uncertainty around Brexit, Philip Hammond has warned.
In comments sure to infuriate Brexiteers, the Chancellor said it was “definitely the case” that the Brexit impasse had impacted the economy as businesses hold back from spending.
According to a forecast from the Bank of England, business investment was 20% lower than it expected before the referendum, Mr Hammond warned.
Speaking during a session of the Treasury Select Committee, he told MPs: “It is pretty clear to me that the principle reason is uncertainty created by the continuing of working out how we are going to exit from the EU.
“Where businesses are able to defer investment decisions until they are clearer about the future, many of them are deciding to do so. And we know that anecdotally both from our own engagement with businesses and from reports from Bank of England agents.”
Mr Hammond, who has repeatedly angered Tory Brexiteers with warnings about the economic impact of the referendum result, said businesses had welcomed the Government’s decision to seek another extension to the Article 50 process in a bid to avoid a no-deal Brexit.
“In all engagements I’ve had with business without exception, they believe the extension of Article 50 was a lot better outcome than the potential alternative,” he said.
“But of course, business shares the view I have expressed that the sooner we can bring this to a conclusion the better so that investment can resume and people can get on with the day job as it were.”
The Chancellor also blamed the Brexit process for diverting staff and using up "bandwidth" within his own department.
"The Treasury has approximately the equivalent of 1500 full time staff, on the most recent check, around 400 full-time equivalents were working on Brexit related matters, that is a huge chunk of the Treasury’s capacity is focussed on the Brexit task, and clearly, once we are able to redeploy most or all of those people onto other tasks, that will make a difference," he said.
His comments come as talks between Labour and the Government to find a compromise solution remain deadlocked, with the Prime Minister accusing the opposition of dragging their feet in negotiations.
But in a message to MPs, Mr Hammond added: “The sooner we can bring that process to an end the better, both for the state of our politics and for investment in our economy.”
BANK OF ENGLAND
Meanwhile, Mr Hammond this morning kick-started the process to find a replacement for Bank of England Govenor Mark Carney, who is set to depart from the role in January 2020 after almost 7 years in the post.
Mr Carney had initially intended to remain as Governor for five years, but twice extended his term due to the continued uncertainty from Brexit.
Announcing the formal start of the process to replace Mr Carney, the Chancellor said: “In today’s rapidly evolving economy the role of Governor is more important than ever.”
“Finding a candidate with the right skills and experience to lead the Bank of England is vital for ensuring the continuing strength of our economy and for maintaining the UK’s position as a leading global financial centre.”
He added: “I look forward to working with Mark Carney over the remaining months of his term as governor. His steady hand has helped steer the UK economy through a challenging period and we are now seeing stable, low inflation and the fastest wage growth in over a decade.
"And under Mark’s leadership the Bank of England has been at the forefront of reforms to make our financial system safer and more accountable.”