Britain's consumers and businesses are holding back from spending owing to uncertainty surrounding Brexit negotiations, the country's finance minister said

London (AFP) - Britain’s businesses have reined in spending as Brexit uncertainty weighs, the government said Wednesday, as it pledged £250 million ($330 million, 279 million euros) for departments to prepare the country’s EU departure.

Chancellor of the Exchequer Philip Hammond told a cross-party panel of MPs that while the UK economy was “fundamentally robust”, British businesses and consumers were tightening their belts.

Hammond told the Treasury Select Committee that “the cloud of uncertainty over current negotiations is acting as a temporary dampener and we need to remove it as soon as possible to make some progress.”

“There is plenty of anecdotal evidence that businesses and consumers are waiting to see what the outcome is before firming up investment decisions and consumption decisions,” he added.

Speaking later in parliament, Prime Minister Theresa May said her Conservative government was “committing money to prepare for Brexit, including a no-deal scenario”.

She added: “The Treasury has committed over £250 million of new money to departments”, including those overseeing immigration, transport and agriculture.

- Slower growth forecasts -

Wednesday’s updates by the government come a day after the International Monetary Fund said Britain’s gross domestic product growth would slow to 1.7 percent this year from 1.8 percent in 2016 – and slow to 1.5 percent growth next year.

The European Union and Britain clashed Monday after May said the ball was in the EU’s court as Brexit negotiations entered a critical fifth round.

Talks have stalled on all three of the key divorce issues – the bill Britain must pay for exiting the EU, the rights of the bloc’s citizens living in Britain, and the fate of the border between the UK province Northern Ireland and eurozone member Ireland.

The Office for Budget Responsibility warned Tuesday that British productivity growth is lower than previously forecast, dealing a blow to May’s government before Hammond delivers the country’s tax-and-spend plans in a key budget next month.

The office, Britain’s fiscal watchdog, added that it would “significantly” reduce its estimate for productivity growth over the next five years – which will in turn hit forecasts for economic growth and public finances.

Productivity refers to the average level of output produced per worker or per hour.

Hammond told the committee Wednesday that issues holding back productivity growth include under-developed infrastructure in the public sector and a skills shortage among workers.

But he also pointed to an issue he viewed as unique to Britain compared to other leading economies.

“We do have a fundamental underlying problem about productivity growth in the UK economy,” the chancellor told MPs.

“The UK distinctive issue is regional disparity. I’ve got no doubt in my mind that the staggering disparity between regional productivity performance is a major drag on the UK economy overall.

“It’s also a major social issue for us in the UK. There is no other developed economy that has such a large productivity performance gap between its capital city and its second and third city.”