Britain’s economy is back, says chancellor

Chancellor Jeremy Hunt says Britain’s economy is “back”, and that his strategy for growth has been welcomed at the International Monetary Fund meeting in Washington.

His predecessor, Kwasi Kwarteng, left the previous IMF meeting in October early, amid a barrage of criticism.

Mr Hunt said the international lending body saw he was “putting the British economy back on the right track”.

However, the latest figures show the UK economy failed to grow in February.

On Wednesday, the IMF said it expected the UK economy to shrink by 0.3% in 2023, which would make it one of the worst performing of the world’s major economies.

When challenged over whether the UK’s current performance undermined his positive message, Mr Hunt said: “It’s other finance ministers who are telling me Britain is back”.

Britain’s economy has only just recovered to the size it was prior to the pandemic, following months of industrial action, rapidly rising prices and labour shortages.

On Friday nurses in the RCN union rejected the offer of a 5% pay rise and said they planned to strike again at the start of May. Meanwhile, NHS junior doctors in England staged a four-day walkout over pay, which ended at 07:00 on Saturday.

The wave of industrial action affecting the UK in recent months has contributed to its lack of growth, the Office of National Statistics said this week.

However, Mr Hunt said it was important to avoid fuelling further inflation through pay rises. He said Britain had avoided recession this year “so far”, and that he hoped to see faster growth and falling inflation in the months ahead.

Measures in his March Budget to help businesses recruit more staff and to increase investment, including an increase in childcare funding, should stimulate growth, he added.

Investor confidence in the UK was shaken last year during the short-lived government of prime minister Liz Truss, which saw Mr Kwarteng present an economic strategy that included major tax cuts without an explanation of how they would be funded.

The outlook for the UK, which relies heavily on financial services, could be clouded by current uncertainty in the banking sector, following the collapse of three US banks and UBS’s emergency takeover of Credit Suisse.

However, Mr Hunt said the UK had “a very robust, resilient banking system”, which was now in a much better position than it was before the 2008 financial crisis.

“Am I confident in the resilience of our banking system, the second largest financial services centre in the world?’ Yes, I am,” he said.

While the government is considering reforming some of the rules governing financial services, put in place after 2008, Mr Hunt said the plan was “absolutely not to unlearn the lessons of the financial crisis”.

“We are looking at all of these things, but we’re not going to do it in a way that rows back on any of the very important protections that we have in place,” he said.

But he said the growth of the UK’s tech and life sciences industries meant regulations needed to adapt.

“We have a lot of high growth companies in the UK, and they need to have banking services that suit their needs. And that’s a difference from a decade ago,” he said.