Sweden warns UK against aggressive tax cuts amid Brexit talks

[STOCKHOLM] The UK should avoid any drastic steps to cut corporate taxes, or similar measures, as it prepares to start talks on leaving the European Union, Swedish Prime Minister Stefan Loefven said.

The premier of the largest Nordic economy also said the UK's exit from the 28-nation bloc "shouldn't take longer than necessary."

"But if the UK wants some time to think about the situation, this will also give EU countries some time," Mr Loefven told Bloomberg after giving a speech in Stockholm on Sunday.

"On the other hand, you hear about plans in the UK to, for example, lower corporate taxes considerably. If they, during this time, begin that kind of race, that will of course make discussions more difficult."

UK policy makers are now dealing with the fallout of the June vote backing a Brexit and are looking at the first part of next year to start formal talks. Prime Minister Theresa May has delayed starting Britain's exit as she puts together a team and prepares for what will inevitably be tough negotiations.

At the same time, UK Chancellor of the Exchequer Philip Hammond has expressed readiness to "reset" fiscal policy through corporate tax cuts, among other measures, to support the economy.

Mr Loefven, who is traveling to Germany to meet with Chancellor Angela Merkel on Friday, said any "aggressiveness from Britain in those types of issues, that doesn't improve the relationship."

For Sweden, there will be more room to maneuver once it emerges from its budget deficits, Mr Loefven said. He announced plans on Sunday to educate an additional 3,600 teachers.

On Wednesday, Finance Minister Magdalena Andersson will present new economic and fiscal forecasts ahead of budget negotiations at the government's Harpsund retreat.

"We will continue to invest, because that's the future," Mr Loefven said. "Tax cuts are not the future. We need to continue to invest, and, for example, make sure our children get a good education."

BLOOMBERG