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Philip Hammond, U.K. chancellor of the exchequer, leaves 11 Downing Street in London, U.K., on Thursday, July 14, 2016. Hammond said the vote to leave the European Union had rattled confidence and that he will take whatever measures needed to shore up the British economy.Simon Dawson/Bloomberg

When freshly minted British Prime Minister Theresa May cobbled together her first cabinet last week, one of her easiest decisions was to axe Chancellor of the Exchequer George Osborne. The scare tactics he employed as a high-profile leader of the "remain" camp had angered the Brexit crowd and his tough austerity cuts were blamed for leaving voters in a foul mood.

Another easy decision was her choice of cabinet veteran Philip Hammond, a loyal ally, as Mr. Osborne's replacement at No. 11 Downing Street.

Mr. Hammond, 60, who was foreign secretary in the last Cameron government, is regarded as a pragmatic, steady hand at the tiller who avoids gaffes, weighs evidence carefully before making decisions and remains committed to fiscal prudence.

The wealthy former business executive, consultant and Oxford University economics graduate has long coveted the senior finance portfolio. Like his predecessor and most of Britain's business and financial elite, Mr. Hammond was an advocate of austerity and of staying in the EU. Now, he has the unenviable task of steering a dramatically different course for both the economy and the public purse as Britain sails into uncharted waters.

David Davis, a veteran Conservative hardliner who has long sought Britain's departure from the European Union, has been put in charge of what are sure to be lengthy and thorny Brexit negotiations.

But while Mr. Davis confidently predicts an easy Brexit and a bright future featuring a plethora of free-trade deals inked over the next two years with the world's biggest economies, it will be up to Mr. Hammond to cope with what is likely to be a very different reality.

His main tasks: Protecting the interests of London's vital financial sector and keeping the sputtering economy from grinding to a halt without blowing up the deficit (at about 4 per cent of gross domestic product, it's more than double Canada's projected level this fiscal year) and incurring the wrath of foreign bondholders.

A day before taking on his new assignment, Mr. Hammond told a gathering of British bankers that he understood the importance of retaining the passports that allow financial firms licensed in one EU country to operate freely in all the others. He promised that the government would "do our bit to get you the certainty you crave."

That will be no easy task, as the Swiss, who negotiated a free-trade pact with the EU but failed to win such rights for their banks, can attest. Not surprisingly, Dublin, Frankfurt and Paris have already started courting U.S. and other financial houses to move their European bases out of London.

On the economic front, Mr. Hammond intends to spend the summer months holed up with Bank of England Governor Mark Carney to devise a co-ordinated strategy for the economy, which will involve a combination of both fiscal and monetary stimulus.

Mr. Hammond's new boss has already wisely abandoned Mr. Osborne's pledge of a balanced budget by 2020, and the new Chancellor has promised more borrowing, even as bond-monitoring agencies cut the government's credit rating. But he says there will be no emergency budget measures in response to the Brexit outcome (as Mr. Osborne had promised), noting that there is plenty of time to take stock before the usual financial statement in the fall.

And he remains a fiscal hawk at heart.

"Of course we've got to reduce the deficit further," Mr. Hammond said in a TV interview. "But looking at how and when and at what pace we do that, and how we measure our progress in doing that is something that we now need to consider in the light of the new circumstances that the economy is facing."

Those circumstances may well include the country's first recession since 2009, economy watchers warn.

Britain faces a "mild" slump by early next year, Goldman Sachs economists predicted soon after the referendum votes were tallied. Their forecast calls for a decline in GDP of 2.75 percentage points over the next 18 months from the impact of "increased uncertainty and deteriorating terms of trade."

Larry Fink, chief executive of fund giant BlackRock, also sees a relatively modest recession, with GDP shrinking as much as two percentage points, as businesses cut spending and freeze hiring. The economy grew by 0.6 per cent in the second quarter.

Mr. Hammond, whom the Financial Times says was called "Spreadsheet Phil" by some party colleagues for his no-nonsense manner, probably won't find much to smile about in his new job either.

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