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  1. ITV Report

Growth figures 'very good news' ahead of Brexit negotiations, Hammond tells ITV News

The Chancellor has hailed the latest growth figures for the UK economy as "very good news" ahead of Brexit negotiations with EU leaders.

Philip Hammond told ITV News that growth of 0.5% in the three months after the EU referendum showed that the economy is "resilient", and puts the UK in a "position of clear strength" before the formal withdrawal process begins by the end of March next year.

Figures released by the Office for National Statistics (ONS) on Thursday showed that while the economy had performed better than expected, it had slowed down compared to the previous quarter, which saw growth of 0.7%.

And Mr Hammond was frank about the economy's prospects for 2017, adding: "All the forecasters suggest next year will be slower and we should prepare to support the economy during a period of slower growth."

  • Service sector bucks the trend
The service sector performed strongly after the Brexit vote. Credit: PA

The service sector expanded by 0.8% from July to September, but the picture was bleaker elsewhere in the economy.

Construction fell by 1.4%, manufacturing decreased by 1.0%, agriculture dropped by 0.7% and production contracted by 0.4%.

Speaking to ITV News Economics Editor Noreena Hertz, Mr Hammond admitted the plunge the value of sterling means "we will be seeing some inflationary pressures" in the months ahead, as he sought to quell concerns by businesses about the UK's future trading relationship with the rest of the world.

"Export is a very important focus for us during the period of negotiation with our EU partners. We now need to refocus on our exports to the wider world," he said.

"The decline in the value of sterling which has negative effects does also have a positive effect for British exporters."

However Noreena Hertz said the contraction in manufacturing suggests the weak pound is not helping exporters as much as it did during the 2008 financial crisis.

Labour said the "disappointing" and "sluggish" growth figures were the result of "the failures of the Tories’ economic approach after six years in power."

Shadow Treasury Minister Jonathan Reynolds added that manufacturing was showing "little sign of benefiting from lower sterling" and it is "clear" the government has "no plan for Brexit".

  • Deficit reduction plan
George Osborne had planned to balance the budget by 2020. Credit: PA

Mr Hammond also confirmed he would set out in the Autumn Statement his plan for balancing the budget to reduce the "very big deficit".

The Chancellor had already abandoned his predecessor George Osborne's original plan to balance the books by 2020 - a plan he himself scrapped days before he was sacked by Theresa May.

"We have a very large debt and we still have a very big deficit," said Mr Hammond. "We have to behave responsibly, we have to send a clear message that we continue to target a budget balance living within our means, but we're no longer going to try to do that by 2020."