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British Finance Minister Vows Response over Brexit Shock | ASHARQ AL-AWSAT English Archive 2005 -2017
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British Finance Minister Philip Hammond. AFP

London-British Finance Minister Philip Hammond, who was named as chancellor of the exchequer by Prime Minister Theresa May last week, has said the Bank of England would take the first steps to help steer the economy through its Brexit shock.

“The initial response to this kind of a shock must be a monetary response delivered by the Bank of England,” Hammond said on Tuesday. “And the governor, in announcing that interest rates were not to be lowered last week, did make it clear that the Bank is developing a monetary package that it will announce in due course.”

The BoE said last week that it was working on a possible package of measures to be announced on Aug. 4 to cushion the expected blow from last month’s referendum vote to take Britain out of the European Union.

Many economists expect the BoE will halve its already record low Bank Rate to 0.25 percent and possibly revive its bond-buying program. Some have also speculated that the Bank might buy bonds issued specifically to fund infrastructure spending.

In a question-and-answer session with lawmakers, Hammond said Britain needed a new framework to tackle its budget deficit, which he said was “very large” and needed to be addressed.

Britain’s budget deficit stands at around 4 percent of gross domestic product, down from more than 10 percent in 2010 but still among the largest of rich nations around the world.

Asked whether he would stick with a proposal made by Osborne shortly after the referendum to lower Britain’s corporation tax rate to below 15 percent, Hammond said his focus would be to boost business investment.

“(When) we look at the corporate tax environment, we will not just be looking at headline rates, we will be looking at what the marginal effective rates of corporate tax are for investors in the UK,” he said.

Meanwhile, an industry survey showed on Tuesday that British manufacturers’ confidence about the outlook for their businesses and the wider economy has fallen to its lowest in at least two years after Britain’s vote to leave the European Union.

Few companies had seen an immediate impact from the June 23 vote, the EEF manufacturing trade body said in a one-off version of its quarterly survey to gauge members’ post-Brexit feeling.

But 29 percent of firms expected domestic orders to fall over the next six months as the wider economy slowed. A net 12 percent expected a fall in EU orders and a similar proportion forecast a rise in non-EU sales.