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OBR: Fiscal rules dead; economic weakness may persist

Sky News economics editor Ed Conway has been taking a closer look the OBR's Fiscal Risks Report...

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Meanwhile, Channel 4 News business editor Siobhan Kennedy tweets:

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Charity shops boost UK retail sales

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More on the Office for National Statistics retail sales data, which showed an unexpected rise in June.

"Retail as a whole saw a return to growth in the month of June, mainly due to growth in non-food stores with increased sales in second-hand goods, including charity shops and antiques," ONS statistician Rhian Murphy said.

But, she said: "Retail sales growth slowed in the latest three months as food stores saw falling sales for the first time this year and department stores continued their steady decline".

Retail sales helpful news for the economy

Economic adviser to the EY Item Club of forecasters tweets:

A sobering thought...

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The scenario that the OBR uses in its Fiscal Risks Report to stress test the UK economy's response to a no-deal Brexit - which could lead to a recession next year - is not the worst one, such as the conditions envisioned by the Bank of England which it said could lead to the economy shrinking by 8%.

The OBR says: "The stress test is by no means a worst-case scenario under a no-deal, no-transition Brexit.

"Neither the cyclical downturn nor the medium-term loss of potential output are as large as those considered in the Bank of England’s disruptive and disorderly Brexit scenarios that were published last year.

"Most important from the perspective of fiscal sustainability would be if lower trade intensity were to generate adverse dynamic effects on productivity and potential output. These would be relevant in any Brexit scenario.”

Hammond fears no-deal Brexit impact on economy

Philip Hammond
PA Media

Philip Hammond has been speaking to Reuters on the sidelines of G7 finance ministers meeting in France.

The Chancellor said that the report from the Office for Budget Responsibility (OBR) showed that even in the most benign version of a no-deal Brexit there would be "a very significant hit to the UK economy".

He said that the OBR was clear that in a less benign version of a no deal scenario, the hit to the economy would be much harder, causing a much deeper recession.

"So I greatly fear the impact on our economy and our public finances of the kind of no-deal Brexit that is realistically being discussed now," Mr Hammond said.

A deep crisis-like impact on the public finances

Faisal Islam

BBC Economics Editor

notes and coins
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The government’s official independent budgetary watchdog - the Office for Budget Responsibility - has for the first time put a price on the impact to the public finances of leaving the European Union without a deal.

The main measure of the deficit - the annual shortfall of tax revenue raised versus public spending - is forecast to be £30bn higher from next year (2020-2021). The numbers come at a sensitive time politically when both potential future Prime Ministers suggest that no-deal Brexit is possible this year.

The OBR is legally obliged to consider all threats to the public finances, and today’s new numbers come as part of its biannual Fiscal Risks Report.

The fall in tax revenues is forecast to significantly outweigh any fiscal benefit from no longer paying the UK’s subscription fee as a member of the EU. The numbers show a deep crisis-like impact on the public finances, and are based on the IMF’s projections for the economy. But they go further showing a 5.9% hit to the economy.