Philip Hammond, the UK’s new Chancellor, has said that he will use the Autumn Statement to “reset fiscal policy” if it proves necessary to do so in the wake of the Brexit vote.
Hammond made the announcement during a trade visit to China. He said: “Over the medium term we will have the opportunity with our Autumn Statements, our regular late-year fiscal event, to reset fiscal policy if we deem it necessary to do so in the light of the data that will emerge over the coming months showing us exactly what is happening in the economy post the referendum decision.”
Hammond’s comments came as market analysts Markit Economics published a composite survey that showed that the UK economy had contracted at its steepest pace since early-2009.
Chris Williamson, Chief Economist at Markit, said: “July saw a dramatic deterioration in the economy, with business activity slumping at the fastest rate since the height of the global financial crisis in early-2009. The downturn, whether manifesting itself in order book cancellations, or a lack of new orders or the postponement or halting of projects, was most commonly attributed in one way or another to ‘Brexit.'”
“The one ray of light was an improvement in manufacturing export growth to the best for two years as the weak pound helped drive overseas sales, though producers also suffered the flip-side of a weak currency as import prices spiked higher.”
“At this level, the survey is signaling a 0.4 percent contraction of the economy in the third quarter, though much of course depends on whether we see a further deterioration in August or if July represents a shock-induced nadir. Given the record slump in service sector business expectations, the suggestion is that there is further pain to come in the short-term at least.”