Philip Hammond has promised to "reset" Britain's tax and spending plans if the economy falters in the wake of Brexit.

Speaking at a meeting of business leaders in Beijing, the Chancellor signalled he may have to throw out George Osborne's plans for cutting the deficit in the Autumn Statement, expected towards the end of the year.

He said: "Of course we understand that the decision, particularly the unexpected nature of the (Brexit) decision, has caused some turbulence.

"But we have the tools necessary; in the short term the Bank of England will use the monetary tools at their disposal.

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"Over the medium term we will have the opportunity with our Autumn Statement to reset fiscal policy if we deem it necessary to do so in light of data in the coming months."


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His comments came minutes before fresh data was released showing the economy weakened dramatically in the wake of the referendum result.

Purchasing Managers Indexes (PMI) for the manufacturing and services sector, which comprise the vast majority of UK output, indicated the economy is heading for a 0.4% contraction in the third quarter.

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Should the economy continue to contract for two successive quarters, the UK would be in a technical recession.

The PMI data is the first reliable evidence of the impact of Brexit on business activity in the UK - though it follows consumer confidence and housing surveys which both show a dip in optimism.

However, stock markets have recovered swiftly in the wake of the Leave vote.

The Chancellor is in Beijing on his way to the G20 summit of finance ministers in Chengdu.

Meanwhile, China has welcomed Britain's decision to designate a separatist group active in the far-western region of Xinjiang as a terrorist organisation.

The timing of the UK move to list the Pakistan-based East Turkistan Islamic Movement will fuel speculation it was to smooth the diplomatic way for the Chancellor's visit.

East Turkestan is what many members of China's ethnic minority Uighur Muslims call Xinjiang.