'Brexit is not the issue': Hunt insists leaving EU is 'not drag on economy'

Jeremy Hunt has been in Japan, meeting other finance ministers from the G7. Credit: HMT

Jeremy Hunt has insisted Brexit is not the reason the UK economy is struggling to keep up with other G7 nations.

The latest gross domestic product figures show the UK is “still at the bottom of the G7 league table”, according to economists, and the only member that has not recovered its economy to pre-pandemic levels.

GDP figures show growth still 0.5% lower in the first quarter of this year than in the last quarter of 2019 - just before Covid-19 hit the global economy - but the UK did grow marginally by 0.1% between January and March 2023.

Asked by ITV News Economics Editor Joel Hills if Brexit is to blame for the UK lagging behind its allies, the chancellor said: "Since the referendum we have grown faster than Germany so it is simply not the case that Brexit is the issue."

Chancellor insists Brexit is not 'drag' on economy

Pushed to explain if leaving the EU had been a drag on the economy, he responded: "I don't believe it is - the figures don't show that. The figures show for example that since we've left the single market that we've grown faster than France or Italy."

He insisted the latest assessment showed "much better figures than anyone would possibly have predicted even three months ago", but he was unable to say when the UK would return to 2019 levels.

"It's for the economists to say when we are going to get our quarterly levels back to pre-pandemic levels but Germany is also in the same situation as we are," he said.

Defending his government's work on the economy, he pointed out that the most up to date monthly figures "we are now above pandemic levels across the whole economy but only marginally".

He told ITV News that the International Monetary Fund says the UK is on the "right track" for growth and the economy will be bigger than France's and Germany's by 2025.

The chancellor is in Japan for meetings with other finance ministers from the G7, to discuss ways to support Ukraine and pressure Russia to end the war.

A donation to Ukraine of long-range weapons was made by the UK on Thursday as the G7 meetings got underway, with Defence Secretary Ben Wallace saying the Storm Shadow missiles would facilitate a "push back" of Russian forces.

It is the war in Ukraine that has caused much of the financial pressure being felt around the world and in the UK, contributing to dangerously high inflation levels.

Jeremy Hunt is asked when the UK economy will return to pre-pandemic levels

Rishi Sunak has promised to halve inflation by the end of the year and economists believe the government could be on track to achieve that, but Mr Hunt was unable to confirm that living standards would rise from their depths.

Asked by Joel Hills whether standards would improve this year, the chancellor said: "I hope they will but the biggest thing that I can do is to control inflation because that has a direct impact on eroding living standards."

On Thursday, the Bank of England said it expects GDP to rise by 0.25% this year before a 0.75% increase next year and the year after.

It came as the Bank also increased interest rates from 4.25% to 4.5% – the highest level since 2008.

The Bank of England raised rates in a bid to tackle rising costs, with its Monetary Policy Committee (MPC) explaining that "repeated surprises about the resilience of demand" and stronger than expected inflation were behind the move.

Retail Price Index inflation has been fluctuating at an extremely high level for many months, well beyond the Bank of England’s 2% target.

But there is some optimism from the Bank on the future of Britain's economy.

The MPC said: "The committee judges that growth over much of the forecast period will be materially stronger than in the February report.

"This reflects stronger global growth, lower energy prices, the fiscal support in the spring Budget and the possibility of lower precautionary saving by households than previously thought."

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Mr Hunt said: “It’s good news that the economy is growing but to reach the government’s growth priority we need to stay focused on competitive taxes, labour supply and productivity.

The Bank of England Governor confirmed yesterday that the Budget has made an important start but we will keep going until the job is done and we have the high wage, high growth economy we need.”

Sir Keir Starmer has said the latest economic growth figures were "nothing to celebrate" after UK gross domestic product (GDP) increased by 0.1% between January and March.

Speaking to broadcasters during a visit to the Crick Institute in central London, the Labour leader said: "This is nothing to celebrate and is yet more low growth on the back of 13 years of low growth.

"I think the essential question many people today will be asking themselves is, 'Do I feel any better off now than I did 13 years ago when this government started?'

"I think the resounding answer to that around the country will be, 'No, I don't'."