Britain unleashed more austerity on Wednesday in its latest annual budget and cut its growth outlook, blaming the impact of global markets turbulence rooted in China. Finance minister George Osborne also warned that a potential 'Brexit', or departure from the European Union, would risk damaging the nation's economic recovery, ahead of a key referendum in June.
Chancellor of the Exchequer Osborne said the government would seek additional spending cuts totalling £3.5 billion ($5.0 billion, 4.5 billion euros) by 2020, when it expects to reach a budget surplus despite higher borrowing.
The chancellor pointed to a "dangerous cocktail of risks" including "turbulence in financial markets, slower growth in economies like China, and weak growth in the developed world" for the growth downgrades.
Analysts were meanwhile quick to point out that it was not clear which areas would bear the brunt of the latest cuts. "How these cuts will be made has not been outlined other than described rather vaguely as savings," said ING economist James Knightley.
"With (government) department budgets already having been cut aggressively it will be interesting to see where new efficiency savings can be made."
In a speech lasting around one hour, Osborne forecast that the British economy was set to grow by 2.0 percent this year, down from a November estimate of 2.4 percent.
Growth was expected to stand at 2.2 percent next year, down from 2.5 percent.
Fiscal watchdog the Office for Budget Responsibility (OBR), which compiles official government forecasts, said the latest predictions were based on the assumption that Britain remained in the European Union.
Osborne, a top figure in Prime Minister David Cameron's Conservative party and government, also revealed plans to cut several taxes levied on businesses amid strongly divergent views from companies on whether Britain should quit the EU.
"This is a budget for small businesses," Osborne told lawmakers.
There were also significant tax cuts for the oil and gas industry, which has been hit by tumbling energy prices.
Turning to Britain's June 23 referendum on EU membership, Osborne repeated the government's strong desire for the UK to stay within the 28-nation trading bloc.
"Britain will be stronger, safer and better off inside a reformed European Union - and I believe we should not put at risk all the hard work the British people have done to make our economy strong again," Osborne told parliament.
Cameron is leading the battle to keep Britain in the EU, but several key members of his Conservative party - notably Mayor of London Boris Johnson - want to leave.
"There appears to be a greater consensus that a vote to leave would result in a period of potentially disruptive uncertainty while the precise details of the UK's new relationship with the EU were negotiated," the OBR said Wednesday, citing various external reports.