Monday 19 February 2018

UK is facing an uphill slog as 'Box Office Phil' enters Number 11

Philip Hammond, the UK's new finance minister
Philip Hammond, the UK's new finance minister

Alex Morales

Philip Hammond, the UK's new chancellor of the exchequer, has been tasked with the job of protecting the economy from the fallout of Brexit and meeting new prime minister Theresa May's pledge to tackle "burning injustice" in society.

Foreign minister for the past two years, the 60-year-old takes over from George Osborne - at a time when the pound is trading at its weakest against the dollar in three decades and companies from Vodafone to JPMorgan Chase are threatening to move jobs abroad after last month's vote to leave the EU.

According to a person familiar with the matter, Osborne was told by May he was no longer wanted in government.

Hammond must quickly decide how best to stimulate an economy already at risk of sliding into recession, while quelling voters' frustration following six years of Osborne's austerity-driven policies. He will also need to defend London's status as a global financial hub and work with May's Brexit team to make sure the UK maintains access to the EU's single market. His challenge will be made easier by May's pledge to abandon Osborne's goal of achieving a budget surplus by 2020 and by Bank of England governor Mark Carney's promise to support the economy.

The chancellor "is going to be very important because not only do we have to renegotiate our relationship with the EU, but the economy is weakening and likely heading into a recession," said Rupert Harrison, a former adviser to Osborne, now at fund managers BlackRock.

Osborne said on Twitter that serving as chancellor had "been a privilege" and that "others will judge - I hope I've left the economy in a better state than I found it in."

Effectively co-prime minister with Cameron, he angered many Conservatives with the extent of his campaigning against Brexit and many voters with his austerity.

Hammond, known sarcastically by broadcasters as 'Box Office Phil' because interviews with him rarely yield major stories, was the bookmakers' favourite to succeed Osborne, given the need for the new government to convey a message of calm to investors and executives. He's "not particularly inspiring, but a safe choice," said Tim Bale, professor of politics at Queen Mary University of London.

Like May, Hammond is sceptical of the EU, yet ultimately decided to campaign to stay within the bloc. He estimated this week it could take six years for the UK to break from the EU and then establish new ties.

A constant in all of David Cameron's cabinets since 2010, he was first in charge of transport and then defence. He has some knowledge of economic matters from working in Cameron's finance team in opposition from 2007 to 2010. He lost out on working in the Treasury after the inconclusive election result of 2010.

Osborne's austerity drive is now being at least partially ditched after it contributed to the anti-establishment mood that drove the Leave campaign to victory.

The UK economy may have needed aiding anyway, with almost three-quarters of economists polled by Bloomberg saying it was bound for recession. Business confidence has already plunged following the referendum.

As for the UK's finance industry, which employs more than two million people and generated £66bn in tax last year, Hammond will be under pressure to defend it in Brexit negotiations as other governments try to lure business away.

Addressing a meeting of the British Bankers' Association on Tuesday, he said he would aim to retain so-called passporting rights - which allow companies to locate in the UK yet sell their services elsewhere in the region. Failure to maintain a similar relationship will cost Britain jobs, according to executives from banks including JPMorgan and UBS Group.

The "financial services industry is probably the most directly affected" by Brexit, Hammond said. "I know and understand the importance of passporting."

Prior to entering parliament in 1997, Hammond worked in the medical equipment manufacturing industry and as a director of a home building company. He also worked as a consultant for the World Bank in Latin America.


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