Philip Hammond takes helm of Britain's Finance Ministry to prepare for Brexit

As Finance Minister, Mr Philip Hammond will have to manage an economy that risks sliding into recession after the vote to leave the EU.
As Finance Minister, Mr Philip Hammond will have to manage an economy that risks sliding into recession after the vote to leave the EU.PHOTO: EPA

LONDON (REUTERS) - Mr Philip Hammond took the helm of Britain's Finance Ministry on Wednesday (July 13) after new Prime Minister Theresa May appointed the former foreign secretary to succeed Mr George Osborne in a government which will take Britain out of the European Union.

Mr Osborne, Chancellor of the Exchequer since 2010 and a leading figure in the unsuccessful campaign to keep Britain in the EU, will join former prime minister and close ally David Cameron in leaving the government.

Mr Hammond, 60, served as transport secretary when the Conservatives took power in coalition with the centrist Liberal Democrats in 2010, moving to take charge of defence in 2011.

His tenure as Foreign Secretary since 2014 has been dominated by the Ukraine crisis, Syria's civil war and negotiations that led last year to a six-power agreement with Iran to scale back its nuclear programme.

 
 

As Finance Minister, Mr Hammond will have to manage an economy that risks sliding into recession after last month's vote to leave the EU, and set new budget goals after Mr Osborne abandoned his aim to run a budget surplus by 2020.

"There are incredibly difficult decisions in terms of the public finances," said Mr Paul Johnson, director of the Institute for Fiscal Studies, before the appointment.

The new Finance Minister will need to stem a slide in confidence in sterling - which is at a 30-year low against the US dollar - convince foreign banks to stay in London and manage a delicate relationship with the Bank of England, which is poised to cut interest rates to an all-time low on Thursday.

Britain's economy grew by 2.2 per cent last year - roughly its long-run average - and the budget deficit fell to 4.0 per cent of GDP, its lowest since the financial crisis though still higher than other big advanced economies.

This relatively rosy situation is set to reverse rapidly. The Bank of England has warned of a material shock to the economy from the Brexit vote, with a possibility of recession, and a Reuters poll of economists sees zero growth in the second half of 2016.

Ratings agency Moody's assigned a negative outlook to its grading of British government debt the day after the referendum, and analyst Kathrin Muehlbronner said there was now a lack of clarity on the government's long-run budget plans.

Hammond, who campaigned for Britain to stay in the EU, once acknowledged that broadcasters referred to him ironically as"Box Office Phil" because he rarely made headlines.

He built up his economic credentials while the Conservatives were in opposition before 2010, serving as trade and industry spokesman and shadow treasury minister.