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Upbeat Hammond predicts pick-up in economic confidence ahead of Brexit

File photo dated 30/01/18 of Chancellor of the Exchequer Philip Hammond, who will tell European leaders that including BritainÕs lucrative financial services sector in a Brexit deal is in the Òmutual interestÓ of the UK and the EU. RESS ASSOCIATION Photo. Issue date: Wednesday March 7, 2018. In a keynote speech in London on Wednesday, the Chancellor will reject the arguments of ÒscepticsÓ who claim there has never been a free trade agreement which includes financial services. See PA story POLITICS Brexit. Photo credit should read: Toby Melville/PA Wire

Chancellor Philip Hammond has said he expects confidence in the economy to pick up in the year ahead as the outcome of the Brexit negotiations becomes clearer.

Mr Hammond, in Washington for the spring meeting of the International Monetary Fund (IMF), said uncertainty over Britain's future outside the EU was having a "dampening" effect on activity.

However he anticipated firms would start to address the "backlog" of investment decisions which had built up while consumers would become more confident about making big-ticket purchases.

"The decision to leave the European Union and then the process of negotiating how our future relationship will work is a source of uncertainty," he told BBC News.

"Business responds to uncertainty by slowing down investment. Households respond to uncertainty by postponing big purchases and that has a dampening effect on the economy.

"As we go through this year I would hope and expect that, as we deliver more and more clarity about what the future of our relationship with the European Union will be, we will start to see that effect unwinding.

"All of those things will have a positive effect on the economy."

Mr Hammond, seen as the leading Cabinet supporter of a "soft" Brexit, has in the past been criticised by hardline Tory Brexiteers as being too gloomy about Britain's prospects outside the EU.

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