You are here: Home - Investing - Experienced Investor - News -

Spring Statement: growth forecast cut but UK borrowing falls

0
Written by: Danielle Levy
13/03/2019
As the UK teeters on the brink of a no deal Brexit, the government’s Spring Statement provided a mixed outlook for the UK’s economy.

With only 16 days until the UK is due to exit the European Union and a deal yet to be agreed, this uncertainty was reflected in the Office for Budget Responsibility’s (OBR) economic forecasts.

The OBR, the UK’s fiscal watchdog, lowered its forecast for UK economic growth forecast for 2019 from 1.6% at the October Budget to 1.2%. On a rolling 12-month basis, this would be the lowest figure recorded since 2009 – the year the UK started to stage a recovery following the recession that was caused by the financial crisis.

The OBR left its 2020 forecast unchanged at 1.4%, but raised its 2021 forecast to 1.6%, up from 1.4% last October. The fiscal watchdog expects the economy to continue to grow at a rate of 1.6% in 2022 and 2023 respectively.

Chancellor Philip Hammond pointed out that in spite of the backdrop of a slowing world economy, Britain’s economy is expected to grow in each of the next five years.

“This country, for the first time in decades, has genuine and sustainable choices about its future,” Hammond told the House of Commons.

Borrowing

There was positive news regarding the UK’s finances, with the OBR predicting that the UK’s budget deficit will total 1.1% of GDP in 2019, coming in lower than its previous forecast of 1.2% in the Autumn Budget. This equates to a £3bn reduction.

Government borrowing is set to fall from £29.3bn in 2019-20, to £21.2bn in 2020-21, £17.6bn in 2021-22, £14.4bn the year after, eventually falling to £13.5bn in 2023-2024. This would represent the lowest level recorded in 22 years.

This leaves the government with £26.6bn of headroom against its requirement to ensure the structural budget deficit stands below 2% of GDP in 2020-21, representing an increase from £15.4bn in October.

Hammond noted that “less borrowing means less debt”: the OBR predicts that public debt will fall from 82.2% of GDP next year and will continue to drop until it reaches 73% in 2023-24.

With debt on a downward path, the chancellor said the government will examine departmental spending in an upcoming three-year spending review, assuming that a Brexit deal is agreed over the coming weeks and the uncertainty clears.

Wage growth

The chancellor’s Spring Statement speech also included good news for wages. Hammond noted that the OBR has revised its forecast for wage growth upwards to 3% or higher every year until 2023. At the same time, he pointed to expectations that inflation is set to remain within the Bank of England’s 2% target.

The chancellor added that 96% of new jobs created last year were in full-time employment.

National Living Wage review

Hammond added that full-time workers on the National Living Wage, which is due to go up to £8.21 per hour from April 2019, have experienced increases since 2016. Later this year, the government is planning to set a new remit for the National Living Wage beyond 2020. Professor Arindajit Dube has been appointed to undertake a review of the latest international evidence on minimum wages to inform this policy.

This development has been welcomed by the Association of Accounting Technicians (AAT), a  professional body.

AAT is pleased that the Chancellor has recognised the importance of delivering higher pay rates and their impact on productivity, something we have repeatedly highlighted over the past couple of years,” said Phil Hall, head of public affairs and public policy.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

ISAs: your back-to-basics guide for 2018/19

Here’s everything you need to know to make the most of your unused ISA allowance ahead of the 5 April deadli...

A guide to Sharia savings accounts

A number of Sharia savings products have upped their game in recent months, beating more familiar competitors ...

Five ways to get on the property ladder without the Bank of Mum and Dad

A report suggests the Bank of Mum and Dad is running low on funds. Fortunately, there are other options for st...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week

Read previous post:
A third of students go without water or heating

One in three UK students have gone without heating or running water in their rental property, a survey has found.

Close