Chancellor Philip Hammond spent much of today’s spring statement warning about the effects of a no deal Brexit. At the same time he was extolling the virtues and the strengths of the UK economy.
I’ve no doubt the Chancellor had two statements prepared for today, with the more upbeat one shelved after the latest House of Commons vote against Prime Minister May’s Brexit plan. Mr Hammond made repeated reference to how bad a no deal Brexit would be and how a smooth Brexit is essential for the continued sunny outlook for the UK economy. With the latest encouraging public finance figures, and assuming a smooth Brexit, Philip Hammond has room for manoeuvre in the upcoming three year spending review and stated he will balance spending, capital investment and tax cuts.
Surprisingly, despite Brexit (as the BBC would say) uncertainty, the UK public finances have continued the upward trend of the last few years. Indeed, the Office for Budget Responsibility must be getting a bit frustrated as every time they publish a forecast it’s inevitably wrong. That was the same again today, as their forecasts at the time of the Budget in October 2018 are outdated and more positive revisions were made today to public finances, but GDP growth in 2019 has been revised down.
A budget deficit of £22.8bn is predicted in the current financial year, 1.1% of GDP compared to a forecast of 1.2% five months ago. Going out five years, the budget deficit in 2023/24 is now expected to be £13.5bn versus last October’s estimate of £19.8bn. However, these will be wrong regardless of the Brexit outcome.
The overall level of debt as a percentage of GDP is also set to fall and is now estimated to be 83.3% at the end of this fiscal year falling to 73% in 2023/24. However, don’t forget the overall level of debt is still increasing and is predicted to be £1.8 trillion.
Spring Statement 2019 key measures announced:
- Inflation set to remain around 2%
- Growth of 1.2% expected in 2019.
- Austerity will come to and end in the forthcoming spending review
- If Brexit deal agreed, there will be a 3 year spending review before the summer recess concluded alongside the autumn budget
- Housing – £3bn affordable homes guarantee scheme to help deliver 30,000 affordable homes
- Late payments for small businesses – company audit committees must report in annual accounts on policies on payments
- £100m for extra policing to cut down on knife crime
- No deal Brexit temporary tariffs announced.
Ben Yearsley March 2019
This article represents a personal view from Ben Yearsley, and is based on his opinion of economic data from the UK and across the globe. It should not be used for investment purposes and does not constitute advice. For investment advice please refer to your financial adviser. No party should act or refrain from acting on anything contained in this material. Relevant primary materials should always be consulted at all times for all purposes. No statements or representations made in this material, document or at the presentation are legally binding on Shore Financial Planning (Plymouth) Ltd or the recipient and no liability is accepted in connection with this material. This article may not be reproduced or circulated without prior permission. Issued by Shore Financial Planning (Plymouth) Ltd, authorised and regulated in the UK by the Financial Conduct Authority.
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