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Clear Sign of Economic Shocks Since Brexit Vote: George Osborne

The chancellor has been keeping a low profile since Prime Minister David Cameron resigned last week in the aftermath of the referendum.

Updated: Jul 02, 2016, 03.39 AM IST
LONDON: Chancel lor of the Exchequer George Osborne said the UK economy is experiencing clear evidence of shock, in a rare intervention since Britain voted to leave the European Union. “Clear signs of economic shock in aftermath of Leave vote,” Osborne tweeted on Friday. “Will require supreme national effort but we can come through this challenge.”

Osborne made his comments after Bank of England Governor Mark Carney warned on Thursday that the central bank may need to loosen monetary policy to cope with the Brexit fallout. The pound capped its worst quarterly performance against the dollar since 2008 and extended its decline in early London trading Friday to below $1.33. The 10-year government bond yield slid to a record-low 0.776%.

The chancellor has been keeping a low profile since Prime Minister David Cameron resigned last week in the aftermath of the referendum, as his Conservative Party descended into infighting over who would succeed him. He gave a speech to reassure markets on Monday and later ruled himself out of the leadership contest, but has said little otherwise. Osborne on Friday gave up his centerpiece policy of turning Britain’s budget deficit into a surplus by 2020, faced with potential economic stress following the country’s shock decision to leave the European Union.

It was the latest setback for Osborne who was once considered a future British leader but who has not put himself forward to succeed Prime Minister David Cameron after the two men failed in their campaign to keep Britain in the EU.

“The government must provide fiscal credibility, so we will continue to be tough on the deficit but we must be realistic about achieving a surplus by the end of this decade,” Osborne said in a speech on Friday.

Even before the referendum, many economists had questioned the ability of Osborne to deliver the surplus by the end of the decade because of the scale of the spending cuts or tax increases that would be required to hit it. Martin Beck, an economist with EY ITEM Club, said Osborne’s announcement could help to counter the Brexit hit to confidence in the economy. “This is a welcome step at a time of economic uncertainty.

Achieving a surplus was always set to drag on activity over the next few years,” Beck said. Bank of England Governor Mark Carney said on Thursday that he expected the central bank would need to pump more monetary stimulus into the economy over the summer.

Bloomberg & Reuters

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