Hammond says challenge to avoid ‘cliff-edge’ Brexit BoE’s Carney stifles UK rate hike talk
LONDON: British Finance Minister Philip Hammond said on Tuesday the world’s fifth-biggest economy faced tough times as it tries to avoid a damaging “cliffedge” departure from the EU.
A day after the start of Brexit talks, Hammond sought to soften the more confrontational tone toward the bloc taken by Prime Minister Theresa May — a role he has readopted since her election flop earlier this month.
“Our departure from the EU is under way. But ensuring that it happens via a smooth pathway to a deep and special future partnership with our EU neighbors, one that protects jobs, prosperity and living standards in Britain will require every ounce of skill and diplomacy,” he said in a speech.
“...Yesterday was a positive start. It will get tougher. But we are ready for the challenge.”
Almost a year to the day since British voters decided to leave the EU, the Brexit strategy debate within the government has been opened up again by May’s unexpected failure to win a parliamentary majority in the June 8 ballot.
She had raised concerns among many businesses in Britain by saying that no deal with the EU was better than a bad deal, raising the prospect of an abrupt Brexit.
Hammond had looked set to lose his job until May’s election flop.
He has now re-emerged as big business’ leading proponent in the government, a role he reinforced on Tuesday by emphasizing the need for “mutually beneficial transitional arrangements to avoid unnecessary disruption and dangerous cliff edges.”
Hammond also reiterated he planned to stick to the government’s target of turning Britain’s budget deficit into a surplus by the mid2020s, despite pressure from the resurgent opposition Labour Party for more public spending.
In his annual Mansion House speech, Hammond said Britain would almost certainly need an implementation period as it left the EU’s single market and its customs union “with current customs border arrangements remaining in place until new long-term arrangements are up and running.”
He also reiterated his calls for Britain to remain open to skilled workers, reflecting a key concern among businesses, which are worried that they might face big hurdles to hiring EU workers after Brexit.
Sterling slides
Bank of England (BoE) Gov. Mark Carney doused speculation that he might soon back higher interest rates, telling bankers on Tuesday that he first wanted to see how the economy coped with Brexit talks in coming months.
Sterling slid by more than half a cent after Carney distanced himself from three other BoE rate-setters who said last week that rates should start to rise for the first time in a decade.
“Now is not yet the time to begin that adjustment,” he said in an annual speech at London’s Mansion House.
The BoE has found itself in an awkward position. Inflation is rising quickly after falls in the value of sterling since last summer’s Brexit vote, while signs of weakness in the economy are increasing, including a slowing of pay growth.