British Finance Minister George Osborne has abandoned the government’s promise to eliminate the budget deficit by 2020, sparking forecasts of more austerity pain following the Brexit vote.
Giving a speech in Manchester on Friday, Osborne said the economy is showing “clear signs” of shock following the vote to leave the European Union.
The Chancellor of the Exchequer said the austerity measures would continue for a longer period.
“The referendum is expected to produce a significant negative economic shock to our economy. How we respond will determine the impact on jobs and growth,” Osborne said.
“We must provide fiscal credibility, continuing to be tough on the deficit while being realistic about achieving a surplus by the end of the decade,” he added.
Osborne first promised to return the country’s budget to a surplus by 2020 at the Conservative Party conference in 2013 and it became policy in the 2015 budget.
On Monday, the American financial services company, Standard and Poor’s, downgraded Britain’s credit rating by two notches, from AAA to AA, a humiliating blow for the country and one that could cost its economy.
S&P was the last of the big three ratings agencies to have a blue-chip rating on the UK’s credit-worthiness. Moody’s, which stripped the UK of its top-notch rating following the austerity cuts of 2013, said last week it might further downgrade its credit rating.
Britain’s vote to exit the EU, known as Brexit, has plunged global markets into turmoil.
In the June 23 referendum, some 52 percent of British voters opted to leave the EU, while roughly 48 percent of the people voted to stay in the union.
The British departure has triggered concerns that other EU nations may follow, challenging the political fabric of an alliance that has been constructed among nearly thirty very different countries.