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BIRMINGHAM, England — Britain’s chancellor of the Exchequer, Philip Hammond, on Monday promised investment in infrastructure projects and pledged to step in to mitigate “turbulence” resulting from the country’s decision to withdraw from the European Union, a significant shift in British economic policy.
The remarks came on the heels of a tough speech by Prime Minister Theresa May on Sunday, in which she suggested that she would put the right to control immigration into Britain at the center of negotiations for Britain’s exit from the bloc, even if doing so put the country’s access to European markets at risk.
Mrs. May’s speech intensified worries in the financial markets about the economic impact of Britain’s decision to exit the European Union, a process known as Brexit. On Monday, the pound fell to its lowest level against the euro since 2013, reflecting concerns in the currency markets about the terms of the withdrawal, for which negotiations will start by the end of March.
Addressing the annual convention of the Conservative Party on Monday, Mr. Hammond promised to make a success of the decision in the June referendum to quit the 28-nation bloc — a vote that transformed the political and economic landscape — but argued that there was no room for “complacency.”
“Throughout the negotiating process, we are ready to take whatever steps are necessary to protect this economy from turbulence,” Mr. Hammond told delegates gathered in Birmingham. “And when the process is over, we are ready to provide support to British businesses as they adjust to life outside the E.U.”
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He said that economic data since June had been encouraging, but he argued that, “fiscal policy may also have a role to play” in the coming months.
Since becoming chancellor of the Exchequer in July, Mr. Hammond has lost little time in jettisoning the fiscal targets of his predecessor, George Osborne, whose six years in government were dominated by spending cuts and efforts to balance the budget.
Mr. Osborne had aimed to restore government finances to a surplus by 2020. But that objective has now been discarded, with Mr. Hammond signaling his willingness to borrow for investment.
In essence, Mr. Hammond’s job description appears to be to mitigate the possible negative impacts from the vote that many analysts expect, at least in the short to medium term.
Those fears were compounded by Mrs. May’s speech on Sunday, which was widely interpreted as a sign that Britain’s membership in the European single market of around 500 million consumers would come to an end. Countries fully integrated into that market currently accept free movement of people across European borders, a right that Mrs. May has pledged to end.
The economic costs of such a move could be significant. In an analysis, two economists at Berenberg Bank in London wrote that a “so-called hard Brexit, in which the U.K. places heavy restrictions on inflows of E.U. economic migrants, risks doing the most damage to the U.K. economy in the long run.”
In such a situation, Holger Schmieding and Kallum Pickering of Berenberg wrote, the right of Britain-based banks to offer financial services across the bloc would most likely be lost and “a hard Brexit could also put free access to the E.U. market for goods at risk.”
“Since a large proportion of U.K. voters who opted for the popular-Brexit vote may have done so for economic reasons such as low pay, poor job prospects etc.,” they added, “a hard Brexit would only worsen these circumstances and could eventually entail negative domestic political consequences.”
In his speech, Mr. Hammond acknowledged that because of the referendum, “many businesses which trade with the E.U. are uncertain about what lies ahead.”
He said that the country’s long-term fiscal plans, which are expected to be announced in November, would address the consequences of short-term uncertainty while recognizing “the need for investment to build an economy that works for everyone.”
“Our stock of public infrastructure — like our roads, railways and flood defenses — languishes near the bottom of the developed-countries’ league table after decades of underinvestment,” Mr. Hammond said, promising “targeted public investment in high-value infrastructure.”
That, he added, could create the “most outward-looking, most dynamic, most competitive, high-wage, high-skilled, low-tax economy in the world.”
In a statement on Monday, Carolyn Fairbairn, director general of the Confederation of British Industry, the country’s biggest lobbying group for businesses, said the government was “right to adopt a more flexible approach to fiscal policy at this point, but it remains essential that public finances are sustainable over the economic cycle.”