Chancellor Philip Hammond says Brexit betrayal would cause more damage than leaving EU – as it happened
Hammond tells MPs that Brexit will lead to slower growth, but it's worth it
Earlier:
- UK service sector growth has weakened
- Services PMI fell to 50.4 last month, lowest since July 2016
- Economists: Brexit worries are eating into growth
3.38pm GMT
Time for a recap.
Chancellor Philip Hammond has claimed that the economic cost of 'betraying' Leave voters would be worse than actually leaving the European Union.
My own judgement is that we need a way forward that heals our country.
We have a deeply fractured country with opinion deeply polarised and trust in the political system correspondingly damaged.
Rather like after 1980, when over a decade our economy made a significant adjustment away from certain patterns of industrial and commercial activities to other patterns of industrial and commercial activities.
2.42pm GMT
Q: If Theresa May's deal is rejected next week, will the Treasury plan for a no-deal?
Hammond says yes, the government already has extensive preparations in place.
Rather like after 1980, when over a decade our economy made a significant adjustment away from certain patterns of industrial and commercial activities to other patterns of industrial and commercial activities.
Hammond: No deal would result in a 1980s style shift in economy away from some industries towards others. Also says Treasury would have to do most of the work in mitigation as BoE's hands would be tied by higher inflation - Not sure many believe that.
2.29pm GMT
Labour MP Wes Streeting is grilling Hammond about his claim that failing to respect the referendum result would cause more damage than abandoning Brexit.
Streeting says that Leave-voting constituents feel that the government is now 'mitigating risks', while Remain supporters are pretty upset by the loss of economic potential. They don't see a brighter vision for Britain outside Europe.
What would be catastrophic would be to fail to move on.
We have to resolve this, so we can go back to rolling out the latest technologies, to supporting our businesses to grow, to focusing on up-skilling.
2.23pm GMT
Hammond: "Once we have left the EU, we will have a very large and very active embassy in Brussels" pic.twitter.com/LL1ML9Szk5
2.21pm GMT
Hammond says the government isn't pursuing 'passporting rights' for UK banks after Brexit, as it simply isn't on the table.
So for services, the government is pushing for a 'looser' relationship than for manufactured goods.
Once we have left the European Union, I imagine we will have a very, very large and very active embassy in Brussels, that will spend a great deal of time and effort seeking to make input to the debates going on within the European Union.
2.12pm GMT
Carney warned food prices cld rise 10% in disorderly Brexit - Hammond claims unilaterally eliminating tariffs wouldn't prevent as main impact wld be via lower / border check costs etc
2.11pm GMT
Q: Should the UK just remove all tariffs after Brexit?
Hammond says unilateral cutting of UK tariffs is an option and is something that the government have been looking at.
"We would have nothing to trade".
2.02pm GMT
It might be very hard for the Bank of England to provide new support to the UK economy after a no-deal Brexit, Philip Hammond warns.
That's because the pound would plunge, sending inflation rocketing, which would typically force the BoE to tighten monetary policy.
Hammond says that in a no-deal Brexit scenario, the Bank of England would be "looking very firmly at the Treasury to respond through a fiscal response" as the Bank's response would be to tighten monetary policy, so as to combat inflation.
1.58pm GMT
Hammond agrees it is "implausible" that the government wouldn't take steps to protect and support the economy, if the UK leaves the EU without a deal.
1.56pm GMT
Q: Under each of your scenarios, Britain's debt/GDP ratio is higher than if we stay in the EU. Doesn't that mean that the 'deal dividend' doesn't exist?
Hammond denies it. He says the deal dividend does exist, in two parts:
1.52pm GMT
Hammond suggests that if the UK and the EU impose tariffs on each other's car exports, a UK factory exporting to Europe wouldn't suddenly close.
Instead, it would probably refocus on the UK market (where European cars would then be more expensive).
1.50pm GMT
Q: Aren't you worried that some regions of the UK will suffer badly from Brexit, and won't be able to recover?
Hammond says his policy will actively minimise the impact of Britain leaving the EU, such as new funding for artificial intelligence.
1.43pm GMT
Q: Why has so little been done to prepare Dover for a no-deal outcome?
Hammond denies that the government has been sitting on its hands. But moving to a WTO-type trading relationship would require major work -- taking years, not months.
To be very frank with you, the planning system might struggle to approve such significant infrastructure changes in two years, let alone get them build.
1.37pm GMT
On the Northern Ireland backstop, Hammond doesn't accept that the backstop would endure forever.
The EU is a highly legalistic body, he explains, and doesn't make promises casually.
Hammond: "I don't think the backstop is something that can endure forever"
1.34pm GMT
Worryingly, the chancellor says there has only been 'patchy' engagement with other EU countries about how the UK border would be managed after a hard Brexit.
Hammond says that UK-EU and bilateral engagement over no-deal Brexit border management has been "patchy" - some countries are better than others.
1.32pm GMT
Q: What happens if MPs reject Theresa May's Brexit deal next week?
We would be in uncharted territory, Hammond replies. That's why it's important that MPs understand the implications of various Brexit scenarios.
If parliament votes down PM's brexit deal -
"We are in unchartered territory"
Says @PhilipHammondUK warning that MPs need to understand there'll be consequences
BREXIT-UK'S HAMMOND SAYS IF PARLIAMENT DOESN'T BACK MAY'S DEAL, IT WILL HAVE TO LOOK AT OTHER SCENARIOS - RTRS
Hammond contradicts PM, who says it's her deal or "no-deal".
1.29pm GMT
Q: How can the nation come together, given some regions will be worse off after Brexit, and people will be poorer?
Philip Hammond says people will be better off in 15 years time than today, under all Brexit scenarios. But the economy will be smaller than it would be if Britain had stayed in the EU.
1.24pm GMT
The Treasury committee turn to the economic cost of Brexit.
My own judgement is that we need a way forward that heals our country.
We have a deeply fractured country with opinion deeply polarised and trust in the political system correspondingly damaged.
I have come to the conclusion that the future success of our country depends on us executing the instruction of the British people in the referendum, leaving the European Union, but doing so in a way that minimises the impact on our economy, and maximises the opportunity we have in the future.
Any solution that left the country divided, and left a large segment of the population feeling betrayed, would in my view have a negative political and societal impact that would out-weigh the very small impact of the White Paper.
1.12pm GMT
UK FinMin Hammond: Cabinet Agreed That Gvt Brexit Economic Scenarios Were Appropriate
1.11pm GMT
The Treasury committee are challenging Hammond over the government's economic analysis, released last week.
Q: Why is there no analysis of the Northern Ireland backstop?
1.06pm GMT
Chancellor Hammond has news -- on the spring statement (updating MPs on the nation's finances).
It will take place sometime between the end of the recess in February, and the end of March, he says.
1.03pm GMT
Chancellor Philip Hammond is testifying to the Treasury committee now, about the UK's economic relationship with the European Union.
It's being streamed here.
After over 2 days of Brexit hearings (& start of debates), Treasury Select Committee might feel a touch jaded. But up next is the Chancellor - and it's not unheard of for him to use the opportunity to let off steam
12.26pm GMT
Economist Andrew Sentance, who used to sit on the Bank of England's interest rate-setting committee, has declared that Britain would be better off staying in the EU.
Quizzed by the Treasury select committee this morning, Sentance said:
I'm not greatly enthusiastic about Brexit. I think we'd be better off if we weren't Brexiting and I do think a no deal scenario could be quite disruptive."
"Even if we strike trade agreements with the EU and some other countries, it means that by 2030 the hit to GDP is relatively small about 1% or so, but we didn't find that things are actually better than they would have been if we were in the EU.
"The Bank appeared to be throwing in the kitchen sink to create the most negative possible scenario. In its own terms it looks pretty extreme.
"The Bank has a number of different roles" It wasn't totally clear that this was a very extreme view even in the Bank's own terms. The communication of it was less than ideal as well.
12.01pm GMT
The shock news that Britain's service sector companies struggled to grow last month hasn't brought any festive cheer to the City.
The FTSE 100 index of top blue-chip shares is still deep in the red, down 83 points or 1.2% at 6939.
The scale of the defeat of the government's Brexit deal in next week's Parliamentary vote is likely to be the key driver of Sterling into year-end; a heavy defeat could be negative for the currency as it would draw into question May's ability to cling to power, a arrow defeat could suggest the deal could slip through on a second or third attempt.
Yesterday narrow but humiliating vote that the Government is in contempt by refusing to release legal advice on Brexit is yet another unhappy incident.
11.42am GMT
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11.30am GMT
Liberal Democrat MP Tom Brake MP says the economic slowdown should alarm ministers, as they grapple with the Brexit crisis.
Here's his take on the sharp drop in service sector growth last month.
"News that confidence in the service sector is the lowest since Brexit should ring alarm bells in Government.
"The UK economy depends very heavily on the service sector for jobs, yet the sector has been almost completely neglected by the Prime Minister in her deal. The service sector reeling from Brexit uncertainty now, before we have even left, is just a foretaste of what will happen to the sector if we do leave the EU."
10.50am GMT
Luxury bathroom business Sanctuary Bathrooms has confirmed that Brexit is hurting the economy.
"Some suppliers are already increasing their prices in 2019, which mean it's going to be unavoidable for customers to avoid price increases across a number of different industries. Similarly, we're finding it difficult to get stock from suppliers, which makes our own trading slightly more challenging. Whether this is precautionary from themselves against the exchange rates and financial market is hard to say.
"We're also finding that the retail market has changed over the last 12 months. Consumers seem to have changed their own attitudes from buying in bulk to buying more individual items, meaning a lower average spend per customer. This could also be tied to feedback we've had that the ability for customers to get qualified tradespeople to do the work is also becoming more difficult with a skills gap.
10.13am GMT
David Smith, economist at Dutch bank ING, believes the fear of a no-deal Brexit is hurting the UK economy....and the damage could get a lot worse.
Here's his take on the service sector slowdown:
According to Markit/CIPS, "delays with clients' business investment decisions" was a key reason for the decline, and we expect this trend to persist over the winter. If the government's Brexit deal is rejected by Parliament, then we're unlikely to know for sure whether 'no deal' has been averted until much closer to the UK's scheduled leave date in March (or later if article 50 has to be extended). This is likely to see an increasing number of firms implement contingency plans - various surveys point to the fact that a reasonably high proportion of firms are yet to do so. At the very least, investment and hiring plans are likely to be put on hold until there is greater clarity.
As we move into the critical Christmas trading period, there's also a risk that this sentiment begins to spill over into the consumer sector. There's already some evidence in the most recent confidence numbers that households are growing more cautious about the general economic situation, which makes for a tough few weeks for retailers and will act as a further drag on overall economic momentum.
The UK services PMI now sits at the lowest level since the immediate aftermath of the 2016 referendum. This clearly demonstrates that the elevated risk of a 'no deal' Brexit is beginning to have a tangible impact on growth, says @SmithEconomicshttps://t.co/IyG6IWMn4X
10.06am GMT
In another blow, UK service sector companies are struggling to find workers.
Several firms interviewed by data firm Markit reported difficulties recruiting suitably skilled staff.
10.02am GMT
The weakening of Britain's service sector last month is a 'nasty surprise', says Howard Archer of EY Item Club.
He adds:
Brexit uncertainties and concerns over global growth weighed on demand for business services...
We have been expecting UK GDP growth to halve to 0.3% quarter-on-quarter in the fourth quarter from 0.6% in the third, but the November PMI's suggest the slowdown could be even more pronounced. This would result in overall GDP growth of 1.3% in 2018, which would be the weakest performance since 2009
UK Services PMI at 50.4 (52.2 prev.) - the lowest since July 2016. Growth is stalling in Q4. There have been false signals before most notably that mid-2016 print, but if poor macro is persistant (& broaden to jobs market) it'll pressure MPs to conclude a #Brexit deal. pic.twitter.com/MJ2SenyaD3
Global slowdown and Brexit uncertainty have impacted business confidence in the UK. Markit PMI is down sharply for the service sector in November, while manufacturing increased m/m, but still with a downward trend. Weakest reading since the Brexit referendum #UK #macrobond pic.twitter.com/RN3aIRLMK0
"Firms are reluctant to commit amid such prolonged uncertainty, global demand is falling, trade tariffs are continuing to bite, and consumer-facing sectors are also seeing a slowdown since the more free-spending summer months.
9.50am GMT
Duncan Brock, group director at the Chartered Institute of Procurement & Supply, is also alarmed by the slump in UK service sector growth.
He blames Brexit uncertainty, plus the persistent threat of a full-blown US-China trade war.
"Disregarding the month immediately after the UK's vote to leave the EU in 2016, the services sector put in its worst performance for almost six years as confidence, a lack of strength in the global economy and Brexit uncertainty took its toll.
"Service providers grappled with the lowest growth of new work from domestic and export markets for nearly two- and-a-half years as paused business contracts remained stuck and not even the temptation of discounted prices encouraged consumers to spend.
9.40am GMT
NEWSFLASH: UK service sector growth has fallen to near-stagnation, with business confidence weakest since Brexit vote.
Data firm Markit's monthly UK services PMI has dropped to just 50.4 in November/ That's the weakest reading since just after the 2016 EU referendum.
"A sharp deterioration in service sector growth leaves the economy flatlining in November as Brexit concerns intensified. Measured across services, manufacturing and construction, the survey results suggest that the pace of economic growth has stalled.
With the exception of July 2016, when business slumped in the immediate aftermath of the EU referendum, November saw the worst performance since February 2013.
9.26am GMT
Ouch! Growth across the eurozone's private sector companies has hit its weakest level in over two years.
Trade war fears and Brexit seem to be biting.
It was in Germany where the euro area's growth slowdown was centred, with latest data showing the weakest expansion here in nearly four years.
However, Italy remained the weakest-performing country, with activity slightly down for a second successive month. In contrast, firmer growth was seen in Ireland, France and Spain, although rates of expansion remained down on those seen earlier in the year.
9.05am GMT
Newsflash: UK car sales fell by 3% last month, as Brexit angst weighed on the market.
The Society for Motor Manufacturers and Traders reports that 158,639 new vehicles were registered last month, nearly 5,000 fewer than a year ago.
"Model and regulatory changes combined with falling consumer confidence conspired to affect supply and demand in November.
The good news is that, as supply constraints ease, and new exciting models come on sale in the months ahead, buyers can look forward to a wide choice of cutting-edge petrol, diesel and electrified cars. It's now critical that a Brexit deal is secured to boost consumer confidence and provide a stimulus to the new car market as we enter the New Year."
8.51am GMT
European stock markets have fallen to a two-week low.
The Stoxx 600 index has shed 1.2%, as traders in Frankfurt, Paris, Madrid and Milan join the selloff.
8.34am GMT
Just 48 hours ago, the markets were rallying after Trump claimed trade war success at his dinner date with Xi Jinping.
That optimism has swiftly fizzled out, partly because Beijing still hasn't confirmed what Xi has actually conceded.
Though it seemed naive at the time, Monday's rally now looks positively deluded, investors gullibly swallowing news of a truce between the US and China, only to be bitten for the umpteenth time by Trump's trade boasts.
Tweeting that he is a 'Tariff Man', the President said that 'when people or countries come in to raid the great wealth of our Nation' he wants 'them to pay for the privilege of doing so', claiming America is 'taking in $billions in Tariffs'. Nonsense, perhaps, but harmful nonsense nevertheless, with the Dow Jones losing its goddamn mind in the meme-able aftermath, the index plunging 800 points to sink back to a one week low of 25000.
8.13am GMT
The FTSE 100 is now at its lowest level in almost two weeks, undermining hopes that a 'Santa Rally' might drive stocks up this month.
8.11am GMT
A flurry of sell orders is driving share down in London, as trading gets underway.
The FTSE 100 has shed more than 80 points, or 1.2%, to 6938 points, following the heavy losses in the US last night.
8.08am GMT
China is attempting to calm the jitters, by declaring that last weekend's meeting between president Xi and president Trump was "very successful".
The commerce ministry added that officials will start implementing the agreed measures immediately.
Related: China confident of agreeing US trade deal despite Trump's combative stance
7.55am GMT
After Wall Street closed, president Trump fired a warning shot at Beijing -- tweeting that he will impose higher tariffs on China soon unless they make concessions.
We are either going to have a REAL DEAL with China, or no deal at all - at which point we will be charging major Tariffs against Chinese product being shipped into the United States. Ultimately, I believe, we will be making a deal - either now or into the future....
.....China does not want Tariffs!
7.46am GMT
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Global stock markets are edgy today after Wall Street suffered a whopping selloff, as fears of a US-China trade war resurfaced.
....I am a Tariff Man. When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so. It will always be the best way to max out our economic power. We are right now taking in $billions in Tariffs. MAKE AMERICA RICH AGAIN
Related: US stock markets slide after Trump warns China: 'I am a Tariff Man'
It was good while it lasted. The rally Monday on the back of the respite in the China-US trade war came to a crashing halt today after President Trump raised doubts that the two countries will be able to find middle ground by the 90-day deadline they have put in place this weekend.
Trump called himself the Tariff Man in a series of ambiguous tweets where he repeated the threat of raising the tariffs on China from 10% to 25% if the two countries don't end up agreeing on trade issues within the next three months.
Economic growth momentum is taking over as the primary concern for investors, even as the latest ISM manufacturing data is holding up well.
This is consistent with our view that the market volatility is likely to rise as we get deeper into the late cycle, with investors questioning growth dynamics and increasing their sensitivity towards downside risks to growth.
S&P 500 falls as much as 3%; Dow is down more than 700 points https://t.co/YHvfhR6RRk pic.twitter.com/3etrkjSO53
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