Image: Gareth Milner Image: Gareth Milner

The Chancellor George Osborne has ditched his target of achieving a government budget surplus by 2020 in the wake of the vote to leave the EU.

Mr Osborne has made eliminating the deficit his number one priority since he was made Chancellor in 2010, and failure to do so could define his career. It is not yet clear if he will continue as Chancellor once a new Prime Minister is chosen.

There were questions over whether or not a surplus would be achieved by 2020 anyway, but a week after the shock result of the EU referendum, he said the UK must "realistic about achieving a surplus by the end of the decade".

Figures published by the Office for National Statistics (ONS) last week showed that government borrowing had not fallen as much as expected so far this year. Despite a £400 million fall in May, government borrowing was still £200m more than forecasts. And it still stands £200m higher than at the same point in the last financial year.

Although the UK's main financial market has recovered and surpassed its pre-referendum levels, Mr Osbore said there has already been "clear signs" of shock in the UK economy.

In a speech, the Chancellor said: "As the governor [of the Bank of England] has said: the referendum is expected to produce a significant negative economic shock to our economy. How we respond will determine the impact on jobs and growth.

"We must provide fiscal credibility, continuing to be tough on the deficit while being realistic about achieving a surplus by the end of the decade. That's exactly what our fiscal rules are designed for."

On Thursday, governor of the Bank of England Mark Carney suggested that interest rates would be cut as early as July, and the Bank's economic stimulus package of quantitative easing will be increased.

He said: “It now seems plausible that uncertainty could remain elevated for some time, with a more persistent drag on activity than we had previously projected."