Splits in UK government amid new Brexit spat

Mixed messages from ministers over economic impact of chaotic EU exit

FILE PHOTO: Britain's Chancellor of the Exchequer Philip Hammond leaves 11 Downing Street in London, Britain, July 2, 2018. REUTERS/Simon Dawson/File Photo
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Splits within the British government over the impact of Brexit were laid bare on Friday as Chancellor Philip Hammond warned of a major hit to the public finances if the UK failed to strike an exit deal with the European Union.

Mr Hammond warned of an annual £7.7 billion cut to GDP for 15 years in a letter released just hours after another senior minister detailed potential opportunities and only short-term impacts from a no-deal Brexit.

Mr Hammond – who backed the campaign for Britain to remain in the EU – was criticised by party colleagues for his downbeat assessment of the prospects for the economy on leaving the 28-nation bloc.

“The Treasury is desperate to stop Brexit. Everything the Treasury does has to be read in this light,” Jacob Rees-Mogg, one of the most outspoken backers of Brexit, told the BBC.

In a letter to a ruling party lawmaker, Mr Hammond said that borrowing would be about £80 billion a year higher by 2033 as the economy grew more slowly. He said that manufacturing, retail, cars and chemicals were likely to be among the sectors most affected in the long-run, citing analysis published in January.

Mr Hammond’s intervention came on the same day that the government published 25 guidance notes to businesses outlining how they should prepare for a no-deal Brexit.

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The government has said repeatedly that it expects to conclude a deal with Brussels that would pave the way for a trade deal and prevent the chaos that would come with unwinding 45 years of integration with Europe.

But in-fighting within the government and the complexity and slow pace of discussions between the two sides has raised the prospect of the talks failing before Britain leaves at the end of March 2019. One Brexit-backing minister, Liam Fox, said that the chance of a no-deal Brexit was 60-40.

Another minister David Lidington told the BBC on Friday that he was “optimistic” that a deal could be reached. “I am not a betting man. I remain both determined and optimistic about this,” he said.