PHILIP Hammond has suffered a triple blow ahead of his November Budget with the Government’s own watchdog warning of an overly rosy productivity outlook, the IMF downgrading growth for the UK and Britain’s trade deficit hitting a record high.

The Office for Budget Responsibility, whose forecasts form the basis of the Chancellor's fiscal decisions, has admitted it is set to "significantly" lower its predictions for the UK's productivity growth over the next five years in next month's forecasts.

In its Forecast Evaluation Report, the OBR said the productivity downgrade was expected to hit growth and weaken the public finances outlook, which is set to decimate the £26 billion headroom Mr Hammond had put faith in to ease the economy through Brexit.

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The OBR warned: "While we continue to believe that there will be some recovery from the very weak productivity performance of recent years, the continued disappointing out-turns, together with the likelihood that heightened uncertainty will continue to weigh on investment, means that we anticipate significantly reducing our assumption for potential productivity growth over the next five years."

No 10 said: "Productivity has been a long-standing challenge for the UK economy, which is why we are focused on boosting our performance to deliver higher living standards and build an economy that works for everyone."

The OBR’s warning came as the latest trade figures showed the deficit in goods had ballooned to a record high in August as official data again failed to signal any significant benefit to exporters from the Brexit-induced collapse in the pound.

No 10

Figures from the Office for National Statistics showed Britain's trade deficit in goods rose by £1.4 billion to £14.2bn as the country imported more chemicals, machinery and textiles.

In the three months to August, exports fell 2.7 per cent while imports rose 3.9 per cent.

It had been thought that British exporters would be able to benefit from the fall in the value of the pound, which makes UK goods cheaper for overseas buyers, but any real benefit has yet to materialise.

Meanwhile, the IMF has raised growth forecasts for all advanced economies except for the UK after a weaker-than-expected economic performance resulted in a downgrade earlier this year amid Brexit uncertainty.

In its latest World Economic Outlook, the organisation said it still expected UK growth to drop to 1.7 per cent in 2017 from 1.8 per cent in 2016 and slow even further in 2018 to 1.5 per cent.

The IMF said the slowdown in growth was driven by a drop in household spending amid the pound's post-Brexit collapse, which has sent inflation up to 2.9 per cent.

John McDonnell for Labour said the IMF report was “yet another blow to the Chancellor’s already crumbling economic credibility”.

He noted: “It is no wonder many of his fellow colleagues in his own party are calling for him to be sacked.”

The Shadow Chancellor said the IMF’s downward revision underscored how seven years of Tory economic failure had weakened the UK economy fundamentally.

“The next Labour Government will provide the proper investment our country needs, underpinned by our Fiscal Credibility Rule, to build a high wage, high skill economy for the many not the few,” he added.