Britain’s economy will grow slightly more than expected this year, finance minister Philip Hammond said Tuesday, but is expected to slow thereafter ahead of the country’s EU divorce.
Gross domestic product (GDP) is projected to grow 1.5 percent this year, Chancellor of the Exchequer Hammond said in a budget update that hiked prior guidance of 1.4 percent thanks to the strengthening world economy.
The new 2018 forecast remains a slowdown, however, compared with expansion of 1.7 percent last year, and followed a gloomy OECD warning that Brexit would crimp growth over the coming years.
Britain’s so-called “Brexit bill” — or the final divorce settlement that the government will pay Brussels to sever ties with the European Union in a year’s time — is estimated to stand at £37.1 billion (42 billion euros, $52 billion), according to the Office for Budget Responsibility (OBR) that number crunches on behalf of the government.
This is in line with a Treasury estimate given last year of between £35 billion and £39 billion.
Britons voted in 2016 to leave the European Union, despite warnings that it would negatively impact growth.
“The vote to leave the European Union appears to have slowed the economy, but by less than we expected immediately after the referendum,” the OBR said in a statement published alongside the budget update.
The economy was proving resilient “thanks in part to the willingness of consumers to maintain spending by reducing their saving”, the OBR added.
Separately on Tuesday, the Organisation for Economic Cooperation and Development (OECD) forecast that Britain would miss out on buoyant global economic growth over the next two years.
The OECD edged up its 2018 Britain forecast by a tenth of a percentage point to 1.3 percent, but froze its 2019 guidance at 1.1 percent expansion. It blamed high inflation dampening consumer demand and continued uncertainty about Brexit.
London has urged Brussels to help negotiate a wide-ranging post-Brexit free trade deal, but the bloc insists there will be no “cherry picking” for the UK.
Glossing over the uncertainty, Hammond told lawmakers: “I am pleased to report… on a UK economy that has grown in every year since 2010.”
But the pace of growth was expected to slow further in 2019. Britain’s scheduled departure from the EU is set for March next year.
Hammond said growth would stand at 1.3 percent in both 2019 and 2020, unchanged from previous forecasts. It would then pick up to 1.4 percent in 2021 and 1.5 percent in 2022.
Prime Minister Theresa May’s Conservative government has made “solid progress towards building an economy that works for everyone”, the chancellor continued.
Opposition Labour finance spokesman John McDonnell however accused Hammond of “astounding” complacency over the impact of ongoing state austerity on public services.
“We face in every public service a crisis on a scale we’ve never seen before,” McDonnell said.
But Hammond added that the latest official forecasts predicted “more jobs, rising real wages, declining inflation, a falling deficit and a shrinking debt”.
Debt was set to drop as a share of GDP from 2018/2019 and the OBR has revised down both debt and borrowing in every year.
Borrowing is now forecast to be £45.2 billion in the current financial year that runs to April 2018 — £4.7 billion lower than forecast in November.
Hammond added that the borrowing forecasts confirmed “the first sustained fall in debt for 17 years, a turning point in the nation’s recovery from the financial crisis of a decade ago”.