Britain's Finance Minister Philip Hammond said Wednesday that the U.K.s decision to leave the European Union will slam the breaks on the country's economic recovery and add more than £122 billion in extra borrowing over the next five years.
In his Autumn Statement to parliament, the Chancellor's first public commitments to spending plans under the government of Prime Minister Theresa May, Hammond also abandoned plans for a budget surplus by the year 2020 and said debt-to-GDP would rise to 90.2% in the next two years as growth slows and borrowing rises.
The government also plans to slash corporate taxes to 17% from the current level of 20% to "by far the lowest rate of overall corporate tax in the G20," Hammond said.
The independent Office for Budget Responsibility (OBR) also trimmed its growth forecasts for the coming years. with GDP seen advancing 1.4% in 2017 (from a March forecast of 2.2%) and 1.7% in 2018. The OBR's growth estimate for this year, however, was lifted to modestly to 2.1%.
As as a result, Britain's budget deficit is also expected to rise to £68 billion in the near term, Hammond cautioned, with a 3.5% shortfall forecast for this fiscal year, up from the 2.9% forecast in March. The figures mean the government will need to find an extra £223.5 billion between now and 2022, either through increased borrowing and bond sales, higher taxes or faster economic growth.
In fact, the OBR pegged the extra borrowing its says is directly related to the country's decision to leave the EU at £58.7 billion over the next five years.
In an attempt to slowing growth, Hammond revealed plans to invest up to £23 billion over the next five years into a new 'productivity fund' that would attempt to ignite growth in certain sectors of the post-Brexit economy.
He also pledged to "kick-start infrastructure and investment" with a £1.1 billion for new broadband lines and a further £2.3 billion to build 100,000 new homes.
However, Hammond said the base level of income a person can earn before paying income tax will rise by £1,000 to £12,500 from April next year.
Benchmark 10-year U.K. government bonds, known as Gilts, reacted sharply to the new borrowing figures, with yields rising as much as 7 basis points to 1.45% in advance of accelerated sales of new debt from the government.