Theresa May insists UK economy can withstand Brexit turbulence

Theresa May has said the UK economy remains strong despite Brexit concerns which have hit the pound and seen growth forecasts for 2017 reduced.

Sterling has fallen to a 31-year low against the dollar while the IMF cut its GDP forecast for next year to 1.1%.

But, as the FTSE 100 rose to an 18-month high, Mrs May said the outlook was "more positive" than many expected.

The PM told the BBC's Laura Kuenssberg that her job was to make the process of EU exit as "smooth as possible".

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But she also acknowledged it would not be "plain sailing" and there would be "bumps in the road".

Mrs May will give her first leader's speech to the Conservative conference on Wednesday against a backdrop of Brexit-induced jitters in foreign exchange markets.

The pound has continued to slide since the prime minister said official negotiations on the terms of exit would begin by next March at the latest and indicated that she was seeking restrictions on freedom of movement rules - a move seen as incompatible with remaining a member of the EU's internal market.

In its latest economic analysis, the IMF said the UK would grow by 1.8% this year, slightly higher than previously forecast in July, saying consumer spending remained robust and market reaction to the EU vote had been "reassuringly orderly". As it released its report, the FTSE 100 share index rose above 7,100 for the first time since May 2015, close to its record high.

Analysis

by Laura Kuenssberg, BBC political editor

The prime minister's language was notably less flamboyant about the possible swoops and dips of the economy than her chancellor, hardly known as an audacious orator.

But like any political leader at any political gathering, her responses are of the moment, of the time.

This week Theresa May wanted to show to her party members, who are largely Eurosceptic, that she is committed to leaving the EU - without giving anything away about how the government will proceed - and show a calm, brave face to the country.

Behind closed doors cabinet ministers express very different views about what our status outside the EU will be.

Read more from Laura

But the IMF expects a significant slowdown in the UK economy next year, with growth down to 1.1% compared with 2.2% in 2015 and the 2.2% forecast before the Brexit vote, amid concerns about the outcome of the UK's negotiations with the rest of the EU.

Mrs May told the BBC's political editor that the negotiations would be complex but that the UK economy was in good shape, with employment at a record high and inflation at a record low.

"Currencies, of course, go up and down," she said. "If you stand back and look at the fundamentals of our economy, which are strong, if you look at the other economic data that has been around in recent weeks, if you look at the most recent forecasts that are now coming out for growth in our economy this year, all of that is more positive than people had expected it to be."

Chancellor Philip Hammond has suggested the government will boost spending, through increased borrowing, to mitigate the impact of any weakening in economic conditions.

Mrs May said this was the right approach. "What the government needs to do is ensure that we are, in terms of the process of Brexit, making that as smooth as possible," she said.

"What matters is that we are clear about the deal we want to get for the British people. That's the right deal, a deal that ensures that British businesses have the maximum opportunity to trade with and operate within the European Union".

'No supplicant'

Asked about her authority to lead the government and to pursue policies not in the Conservatives' 2015 manifesto, she said certain "adaptations" had to be made in response to the Brexit vote and rejected calls for her to seek a mandate from the people through an early general election.

"What we need is stability. You've talked about the economic situation, you've talked about markets. Actually what markets want is stability and a general election would give them instability."

Speaking earlier on BBC Radio 4's Today, she said the UK should not be approaching the negotiations thinking what aspects of the EU membership it should keep, but should be thinking about what kind of relationship it wanted with the EU and the wider world as a "sovereign, independent" country.

"I am going to be ambitious as we go into discussions," she said. "I want British businesses to be able to trade with the EU and operate within the EU and EU businesses to be able to operate within the UK.

"It is not about the UK, in some sense, being a supplicant to the EU but the reciprocity here - a good trade deal is going to be a benefit to us and the EU."

Opposition parties have accused the prime minister of making light of the economic difficulties which lie ahead.

Jon Ashworth MP, Labour's shadow minister without portfolio, said: "The 'bumps in the road' she talks about are real threats to our economy, yet she's recklessly ploughing on, putting jobs and prosperity at risk." And Liberal Democrat leader Tim Farron said: "These 'bumps' as she blithely calls them, are people's jobs and livelihoods. She seems as out of touch as her ministers."

On the third day of the conference, Home Secretary Amber Rudd said further controls on the number of foreign workers and students coming into Britain may be needed to reduce levels of net migration.

Mrs May said she was still committed to the government's goal of reducing net migration from more about 320,000 currently to less than 100,000 but declined to say whether this was achievable by 2020 and said there was no single measure that would bring it about.