Budget 

What is the Brexit dividend?

This article is part of
What you need to know about the Budget 2018

What is the Brexit dividend?

The much-awaited last Budget before Brexit barely had any mention of the UK’s looming departure from the EU. 

This is perhaps not surprising as, just one day before the Budget 2018 took place, Chancellor of the Exchequer Philip Hammond said he would call for another Budget if the UK crashes out of the EU with a 'no deal' in March 2019. 

Mr Hammond said: "We would need to look at a different strategy and frankly we'd need to have a new Budget that set out a different strategy for the future."

So what does the Budget mean for Brexit? 

In the Budget documents, it states: “The Government is seeking a deep and special relationship with the EU, encompassing economic and security cooperation. The government is confident of getting a good deal, but has a responsibility to plan for all scenarios, including the unlikely event no mutually satisfactory agreement can be reached with the EU.”

The government announced an additional £500m of funding for 2019 to 2020 which it has allocated to Brexit. 

The government has already set aside £2.2bn to departments and devolved administrations to support its preparations for Brexit. In the Autumn Budget 2017 the government earmarked an additional £1.5bn for 2019 to 2020. 

The extra £500m announced in this year’s Budget brings the total amount the Government has invested in preparing for Brexit to £4bn since the referendum in 2016. 

Brexit dividend 

One of the few mentions of Brexit that stood out, was the “Brexit dividend”. 

Mr Hammond told an eager House of Commons: “We are at a pivotal moment in our EU negotiations. We will harvest a double ‘deal dividend’. We are confident that we will secure a deal which delivers that dividend.”

But what that dividend ultimately means has stoked differing opinions among experts. 

Marcus Brookes, head of multi-manager at Schroders, says: “The Chancellor today announced spending measures that were going to be funded by additional fiscal headroom but also what he has described as the Brexit dividend.”

“The Chancellor was unable to provide any detail about the Brexit dividend itself in terms of quantum and timing. This is quite possibly because he does not know,” he adds. 

The Office for Budget Responsibility (OBR) revised upwards its forecast for UK economic growth. 

Ahead of the Budget, the growth forecast for 2019 was revised upwards to 1.6 per cent from 1.3 per cent forecast in March. 

For 2020, the growth forecast was revised upwards to 1.4 per cent from the previous 1.3 per cent. 

Edward Park, investment director at Brooks Macdonald, says: “The reality of the government’s fiscal situation is that it will be dominated by economic growth in 2019 to 2020 and this will be highly dependent on the outcome of the Brexit negotiations.