Brexit to tumble UK’s economy in the next five years

Economy - Himanshu Gill - Nov 30,2016

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brexit to tumble uk economy in the next five years

The UK will be forced to borrow an extra 58.7 billion pounds ($72.6 billion) to operate its economy as an outcome of an expected economic slowdown in the country.

The UK has begun facing the aftereffects of Brexit, as the Office of Budget Responsibility (OBR) said growth rate will slump to just 1.4% in 2017, lesser than 2.2% that was predicted in March. This would be the slowest growth rate for UK economy since the global recession of 2009, according to IMF.

Britain’s treasury chief, Philip Hammond believes that higher inflation rates have been ignited by a drop in the pound’s value. However, he didn’t shy away from admitting that a great uncertainty caused by UK’s decision to leave the EU will lead to decrease in investment and consumer demands. The overall growth over the next five years will fall by 2.4% lower than normal, according to the independent government agency OBR.

OBR also announced that there would be a total £122bn of extra borrowing over the next five years, out of which £58 billion could be considered as a direct result of Brexit. Other factors included weaker than expected tax revenues and policy changes.

In the 2016 Budget before Brexit, George Osborne, who served as the Chancellor of Exchequer in David Cameron’s government, had expected to achieve a surplus of £11 billion on the public finances by 2020-21. Instead, the OBR now forecasts a £21bn deficit – and public debt is expected to peak at more than 90% of GDP.

The report also announced plans to hike the minimum wage, invest £1.4 billion ($1.7 billion) in new housing and prohibit real estate agents from charging renters certain fees. The government disclosed its plans to invest £23 billion in innovation and infrastructure over the next five years.