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Hammond says Brexit war chest has grown

Economy is expected to grow by 1.2% this year, sharply down from earlier forecast

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Mr Hammond said latest vote leaves a cloud of uncertainty over the economy and the most urgent task is to fix that.

London

BRITAIN on Wednesday slashed its 2019 economic growth forecast, as Finance Minister Philip Hammond said lifting Brexit's "cloud of uncertainty" was parliament's "most urgent task".

The UK economy is forecast to grow by 1.2 per cent this year, sharply down on the government's prediction of 1.6 per cent in October, Mr Hammond said as he gave a budget update hours before MPs vote on whether to allow the country to leave the EU with no deal.

"I am acutely conscious that the House (of Commons) has other pressing matters on its mind today," Chancellor of the Exchequer Hammond told MPs after announcing that British gross domestic product growth would be much lower than expected this year, with the UK economy hit also by China's slowdown and trade war tensions.

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"Last night's vote leaves a cloud of uncertainty hanging over our economy and . . . our most urgent task in this House is to lift that uncertainty," Mr Hammond said in his budget address.

"Leaving with 'no deal' would mean significant disruption in the short and medium term, and a smaller, less prosperous economy in the long term than if we leave with a deal - higher unemployment, lower wages, higher prices in the shops.

"That is not what the British people voted for in June 2016" to leave the EU, the chancellor added.

Mr Hammond added that the UK economy was expected to grow by 1.4 per cent in 2020, unchanged from the government's October forecast.

In a bid to soothe frantic fears of a chaotic departure, the Conservative government on Wednesday said it would temporarily slash most import tariffs in the event of a "no deal" Brexit.

Britain also vowed not to apply customs checks on the border with Ireland, albeit temporarily.

However, the tariffs pledge also drew an angry response from business leaders.

The new regime is aimed at avoiding a jump in prices of EU imports for consumers and a disruption of supply chains, and is intended to be last up to one year pending negotiations on a more permanent system.

Under the proposal, 87 per cent of imports into Britain will be eligible for zero tariffs. That compares with the current level of 80 per cent.

"These are being imposed on this country with no consultation with business with no time to prepare," Carolyn Julie Fairbairn, director-general of Britain's biggest employers' organisation, the Confederation of British Industry told BBC radio.

"This is no way to run a country," she added, warning that the impact could be a "sledgehammer to our economy".

In the car sector, the government said that carmakers reliant on EU supply chains would not face tariffs for imported parts used to make vehicles in Britain.

Yet the news failed to convince national industry body the Society of Motor Manufacturers and Traders.

"Today's announcement does not resolve the devastating effect a 'no deal' Brexit would have on the automotive industry," said SMMT boss Mike Hawes.

"No policy on tariffs can come close to compensating for the disruption, cost and job losses that would result from 'no deal'.

"It's staggering that we are in this position with only days until we are due to leave."

Britain's business community urged politicians to take a new approach over the Brexit issue.

"It's time for parliament to stop this circus," said Ms Fairbairn after MPs rejected Ms May's draft divorce agreement for the second time late on Tuesday.

She added that Prime Minister Theresa May needed to extend Article 50 deadline for withdrawal from the bloc, to allow sufficient time for an acceptable deal.

"Enough is enough. This must be the last day of failed politics," Ms Fairbairn said in a statement.

" Jobs and livelihoods depend on it. Extending Article 50 to close the door on a March no-deal is now urgent." The British Chambers of Commerce (BCC), which represents thousands of firms, agreed that a "no deal" exit must be avoided.

And it voiced anger that politicians were still grappling with how to facilitate the outcome of the June 2016 EU exit referendum.

"There are no more words to describe the frustration, impatience, and growing anger amongst business after two and a half years on a high-stakes political rollercoaster ride that shows no sign of stopping," the BCC said. AFP

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