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Autumn Statement expected to unveil gloomy economic outlook

Philip Hammond reads through his Autumn Statement in his office in 11 Downing Street Credit: PA

Chancellor Philip Hammond is expected to unveil a bleak outlook for the public finances and downgrades to economic growth forecasts when he delivers his first Autumn Statement.

Increasing Brexit uncertainty and the prospect of lower tax receipts have prompted economists to predict that Britain's fiscal watchdog, the Office for Budget Responsibility (OBR), will revise down UK gross domestic product (GDP) for 2017 and through to 2020.

The OBR - which provides the official independent forecasts of the Government's performance - outlined during the March Budget that GDP would reach 2% this year, before hitting 2.2% in 2017, 2.1% in 2018, 2019, and 2020.

However, the average independent forecasts compiled by the Treasury for November paints a gloomier picture for UK growth.

It predicts UK GDP to hit 2% this year, before sliding back to 1.3% next year, 1.5% in 2018, 1.8% in 2019 and 2.1% in 2020.

The Autumn Statement is Philip Hammond's first as Chancellor. Credit: PA

Mr Hammond will have taken some comfort from the resilience of the UK economy in the wake of the Brexit vote, with third quarter GDP defying expectations of a sharp slowdown to grow 0.5% from 0.7% in the second quarter.

Philip Shaw, chief economist at Investec, said the OBR's forecasts on Wednesday will take into account the series of "earth moving events" since the Budget in March.

"Clearly much has changed since these initial projections were strung together, with the UK having voted to leave the EU, with a new Chancellor Philip Hammond at the helm of the Treasury and, most recently, with Donald Trump winning the US Presidential race.

"Despite these earth moving events, the March Budget projection of 2% for 2016 GDP growth may be revised relatively little.

"However it looks likely that notable downgrades will be built into the numbers for 2017 (March had 2.2%) and beyond too. For one, a weaker investment climate is likely to see GDP forecasts for 2017 and 2018 pitched some way below 2%."

The OBR is also expected to pencil in ballooning Government debt, leaving little wriggle room for Mr Hammond to help cash-strapped households.

Despite being hampered by slowing economic growth and weaker tax receipts, the former chancellor George Osborne planned to trim spending to ensure he could bring the public finances back into the black by 2020.

In March, the OBR predicted Government borrowing would hit £55.5 billion for 2016/17, before falling to 38.8 billion in 2017/18, 21.4 billion in 2018/19 and reaching a surplus of £10.4 billion in 2019/20.

However, Mr Hammond has abandoned the economic direction plotted by his predecessor, with Prime Minister Theresa May scrapping the 2020 target altogether.

Free from these austerity measures, the Chancellor will have greater flexibility to tackle the challenges that lie ahead.

However, he has maintained that the Government will maintain "fiscal discipline" and return "the budget to balance over a sensible period of time".

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