G20 leaders have warned that the outcome of the recent referendum on the UK’s EU membership has increased the risks faced by the global economy, following a meeting in China.
The new Chancellor of the Exchequer, Philip Hammond, told journalists after the two day summit in Chengdu that Brexit had “come up a great deal” during talks.
In a joint communiqué, the heads of the G20 countries said that the vote for Brexit has served to increase “the uncertainty in the global economy”, but assured that all member countries are “well-positioned to proactively address the potential economic and financial consequences” that may follow.
However, the president of Germany’s central bank, Jens Weidmann, said that so far, there has not been any sign that the Brexit vote has had any serious negative effect on Europe’s economic development as a whole.
Brexit was one of several factors causing trouble for the global economy that were discussed at the G20 summit, others including heightened threat from terrorists, refugee flows, and general “geopolitical conflicts”. It was, however, at the forefront of discussions, with emphasis placed on the need for exit terms to be worked out as soon as possible.
The leaders said that the recovery from recent economic turmoil “continues but remains weaker than desirable”, adding that the countries were ready to use “all policy tools” available in order to improve and maintain global economic growth.
Not only did they impress the importance of setting out exit terms generally, but also said that they “hope to see the UK as a close partner of the EU” into the future.
Speaking separately after the meeting, Hammond also expressed the need for urgency when it comes to setting out and completing negotiations between the UK and the EU, saying that “the uncertainty will only end when the deal is done”.
He hinted that he hopes early terms to be set out by the end of this year, though the prospect of informal negotiations occurring before Article 50 is triggered has been met with some resistance from within the EU.
Nonetheless, he said, some sign of shared aims or some clarity with regard to exit terms would “send a reassuring signal to the business community and to markets.”
Hammond said that expected that in the Autumn, when more information about the exact effects that the vote has had on the economy will be available, the relevant policymakers will be in a better position to “reach proper conclusion as to whether a fiscal stimulus is required”. This will help set out the playing field for negotiations better, and will hopefully send a clearer signal to businesses and investors. It is expected that when the Bank of England’s Monetary Policy Committee meets in the Autumn, a cut to the base rate is on the cards.
The Bank’s Governor, Mark Carney, said, in a letter to the G20, praised the group’s resilience in the face of potential crisis, based on the underlying strength shown by markets in recent weeks.
He said: “This resilience in the face of stress demonstrates the enduring benefits of G20 post-crisis reforms. It also reinforces the importance of finishing the” job of implementing these reforms.”