Davos: Hammond admits ‘Brexit fog’ impact on investment

Philip HammondImage copyright
Reuters

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Mr Hammond said the UK would reinvent itself if it had to

Chancellor Philip Hammond has acknowledged that Brexit uncertainty may cause firms to delay investment.

Speaking at Davos, he said some firms were “quite understandably… waiting for the fog of Brexit to clear”.

However, Mr Hammond said many foreign firms were investing in the UK, partly due to the fall in the value of the pound since the referendum.

The chancellor added that the UK economy had been resilient in 2016, “confounding many sceptics”.

He was speaking at the World Economic Forum in Davos on how the UK would handle Brexit.

Some companies are delaying investment decisions, and waiting “to have a better understanding what the future looks like”, he said.

“But other businesses that are not so dependent on access to European market, on trade barriers have continued to invest,” he said.

Pointing to investments by Google, Apple and Japan’s Softbank, he said: “The UK is now seen as a buying opportunity because of the depreciation of the currency and the fact that fundamentally we are still a large market with 65 million affluent consumers.”

‘Reinvent ourselves’

In wide-ranging comments on Friday, the chancellor also said:

  • Scotland would not be able to negotiate with the European Union separately from the UK
  • Former prime minister Tony Blair was to blame for the perception of “uncontrolled migration” because he failed to stagger the influx of EU migrants in 2004
  • The UK could change its “economic model” if locked out of the EU’s single market – reiterating his threat made to German newspaper Welt am Sonntag last week

The UK was fully prepared to reinvent itself after Brexit, Mr Hammond said at the annual economic event.

“If we were to be, by some catastrophe, closed off from those [European] markets we would have to reinvent ourselves.

“And I just want to send out a clear message that we’ve reinvented ourselves before… we will do so again if we have to,” he said.

‘Long transition’

Also at Davos, German finance minister Wolfgang Schaeuble said the UK and Europe had to manage Brexit “to minimise or to avoid any damage to the UK as well as for Europe”.

“The UK remains a very important partner,” Mr Schaeuble said.

But he added the “detail” would be much complicated than “the opening speeches”.

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Getty Images

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Wolfgang Schaeuble said the UK is an “important partner”

Mr Hammond said the UK’s exit was not just about negotiating a free trade deal, and could involve talks on migration policy and interim arrangements.

“There will be many transitions involved… these will take many years.”

The government has said it will trigger Article 50 – the formal process of leaving the EU – by the end of March.

After that, it will officially have two years to complete the process.

Mr Hammond said the government was still on track to meet this “rigid timeframe”, adding that by the end of March 2019 he expected to “at least” have agreement on the “broad principles of the end state that will exist”.

Trump presidency

However, he said establishing “significant new infrastructure” to deal with potential issues such as Britain’s borders and customs “cannot be built and deployed in a few months”, which is why a transition deal would be so important.

“All of these things we have at the moment and all of these things we’d like to work closely with the EU on – these will take many years,” he said.

Turning to trade with the US, Mr Hammond said Britain’s relationship with the Trump administration would “prosper”, but he warned against short-term thinking.

“We have to listen to what the voters are telling us, and be mindful of the messages we are getting from them,” he told the BBC.

“But we must also be clear and honest with the electorate, that some of the solutions which appear to offer short term relief, may not be in own their long term interests.”

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