Chancellor’s caution reflects business uncertainty

By Chris Rogers November 21, 2016 3:14 pm

Philip Hamond is in trouble with his own MPs again.

The Chancellor, who this week gives his Autumn Statement (effectively the second Budget) to Parliament this week, has been lampooned by many within his own ranks. Why? Because Tory backbenchers, and indeed some of his ministerial colleagues, see him as “unrelentingly negative” towards Brexit.

Mr Hammond invoked the ire of his parliamentary colleagues with a series of interviews at the weekend, during which he insisted he would get the economy “match fit” for the departure from the EU. But rather than trumpeting positives, as his colleagues would have wished, the Chancellor was in rather bullish mood – insisting the UK faces “unprecedented uncertainty” after it leaves the EU.

He also found time to dismiss Foreign Secretary Boris Johnson’s suggestions the UK would probably leave the EU customs union.

The Chancellor has been the target of criticism from within Conservative ranks for much of his time in post. But the question is whether such criticism is wholly or even remotely justified.

Reports last week suggested the cost of Brexit could be as much as £100bn, while the Chancellor is also expected to announce a substantial deterioration in public finances. His critics will point to the promises of investment by the likes of Nissan and Google. But with the UK yet to commence negotiations on Brexit, or confirm the type of alternative trade deals required to mitigate a departure from the single market, Mr Hammond’s approach could instead be better described as sanguine or realistic as opposed to overtly negative.

Indeed, the Chancellor’s approach even chimes with that of business. A study published today by Advance, and backed by the CBI (which incidentally has been addressed by Theresa May as part of her efforts to convince of her pro-business credentials), has revealed that only a tenth of businesses are ready for changes caused by Brexit.

Now, you could argue that this represents a failing of business. Surely, they should be prepared? But then, what is it exactly they’re supposed to prepare for?

The Chancellor’s comments over the weekend suggests this will be austere Autumn Statement as opposed to one littered by triumphant references to the opportunities to come. But more broadly, it’ll likely highlight the need for more information from government as to what the negotiating position is, what all the red lines are, and what the costs might be.

That in turn will help business preparation (and possibly reinforce the PM’s message that she’s on the side of business) and engagement with Brexit.

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