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Published: Fri, October 07, 2016
Economy | By Melissa Porter

UK Treasury chief warns of turbulence amid Brexit talks


Hammond said his challenge would be to keep consumer and business confidence stable.

Having already guaranteed the European Union funding for projects signed by businesses prior to this year's Autumn Statement, the Chancellor went a step further, saying: "The Treasury will offer a guarantee to bidders whose projects meet United Kingdom priorities and value for money criteria that, if they secure multi-year European Union funding before we exit, we will guarantee those payments after Britain has left the European Union".

But he warned: "We won't control that process, because we have 27 negotiating partners on the other side". That would start official talks on Britain's exit but also the thornier issue of what the new relationship will be like. It also reached a post-referendum low against the euro, falling 0.88% to €1.1434.

However, he said today that businesses securing multi-year European Union funding up until Brexit would also be supported.

Kathleen Brooks, research director at Forex.com, and City Index says foreign exchange traders are "spooked by May's apparent sanguine attitude to leaving the single market, preferring to focus on immigration and United Kingdom sovereignty".

May's comments were welcomed by the EU, with Donald Tusk, the president of the European Council, saying the statement had brought "welcome clarity" to the situation.

The Confederation of British Industry (CBI), which represents Britain's big companies, said it was still "essential" for Government to be sustainable over the economic cycle.

The Chancellor told the conference: "Our economic future must not be defined by Brexit alone".

While the markets had "calmed" since the Brexit vote, he said it had caused uncertainty for business and the government had a duty to act to protect the economy.

His support for the remain campaign has raised suspicions among Conservative eurosceptics who fear the government may water down the terms of Britain's exit.

Since Theresa May became Prime Minister in July, both she and Mr Hammond have made clear that they will ditch George Osborne's target to get the UK's finances into surplus by 2020 - a goal which the former chancellor himself acknowledged was unlikely to be attainable following the referendum vote for Brexit.

The Institute of Directors (IoD) said that businesses were prepared to give Mr Hammond "some leeway on the deficit" and that its members agreed with pushing back the budget surplus target.

The more rigorous austerity measures set out by his predecessor, George Osborne, "were the right ones for that time", briefed out extracts of Hammond's speech said.

Hammond pledged to maintain fiscal discipline in a "pragmatic" way.

A move to break out of the common market - what experts have termed a "hard Brexit" - has anxious many British businesses as they would face new tariffs, red tape and barriers on exports to the rest of the EU.

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