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.