Spring Statement 2018: Reactions from investors, economists and experts across the City and beyond
Philip Hammond has used his Spring Statement to marginally revise up the Governmentâs growth forecast and announce that public sector net borrowing will be lower than previously expected this year.
The Chancellor also unveiled changes to the timing of business rates revaluations, he committed to investment in affordable housing, and he reiterated his focus on promoting small businesses and entrepreneurs.
But is there really light at the end of the austerity tunnel, as he claims?
Hereâs how experts from across the financial and investment community have responded.
Lucy OâCarroll, chief economist at Aberdeen Standard Investments
âThe Chancellor was always clear that todayâs event was to be a modest one, and he kept that promise. But there is little to cheer by way of economic progress. A woeful growth outlook by past standards. Potentially massive dislocation for the economy just around the corner. And all subject to huge, Brexit-related uncertainties.
âMr Hammond was keen to push a message about there being light at the end of the tunnel. Itâs true that the countryâs debt burden is about to fall. Itâs also true that for the first time since the financial crisis the UK is borrowing only to invest, rather than to fund day-to-day spending.
âBut the Chancellor has made it clear that weâll remain in the tunnel for a while yet: there will be no fundamental reassessment of the UKâs spending needs until 2020. That will mean, in effect, a decade of austerity â" unprecedented in the post-war period.
Keith Wade, chief economist at Schroders
âFor what was meant to be a simple economic statement, the Chancellor turned much of the first Spring Statement into a political opportunity to have a dig at Labour with barbs a bout red books and oncoming trains.
âCertainly he did have an opportunity to unveil stronger growth for this year alongside a forecast of UK inflation falling back to target by the end of the year. Government borrowing has returned to surplus, excluding investment, and debt is set to peak. All good news.
âHowever, much of this was anticipated and it is still fairly cautious with only a modest upward revision to growth of 0.1 per cent to 1.5 per cent this year. We should not be surprised: itâs too early in the political cycle for anything more bullish and the Chancellor himself said that forecasts are there to be beaten.
âNo mention though of the UK being the weakest economy in the G7 at a time when the rest of the world is booming. We welcome the initiatives on housing and training, areas key to getting productivity back on track and boosting long-run growth.â
Hetal Mehta, senior European economist at Legal & General Investment Management
âThe Chancellor of the Exchequer has long been keen to have only one major fiscal event a year and todayâs Spring Statement was just that â" a statement of the latest borrowing and growth projections without any fanfare, or new policy announcements. And yet, he had a small Spring in his step (excuse the pun!).
âAfter significant downgrades to growth and upward revisions to borrowing requirements just in November, the Office for Budget Responsibility has now revised up growth (for the near term) and taken down the borrowing forecasts over the next 5 years.
âThat said we donât expect Hammond to go on a spending splurge in the Autumn Budget. He will likely save the extra room for manoeuvre ahead of the next election and to cushion any downside risks emerging from the UKâs departure from the EU.â
Dean Turner, economist at UBS Wealth Management
âAs expected, the first Spring Statement has been r elatively light on new announcements. On most metrics (borrowing, debt, growth and inflation), the Chancellor delivered better news on the outlook, but the improvements were marginal.
âThough he emphasised his ongoing âbalancedâ approach to the public finances, we will have to wait until the Autumn before there is any meaningful change to public spending. Moreover, any adjustments are still likely to be modest, and are contingent on the economy continuing to grow.
âAs the global growth backdrop holds firm, and with progress on a Brexit transition deal potentially announced next week, we believe downside risks to growth in the short-term are limited.â
Ian Stewart, chief economist at Deloitte
âSpring has come early for Mr Hammond. Just four months on from a notably gloomy Autumn Statement the Chancellor has been able to unveil higher growth forecasts and declare victory on key measures of deficit reduction. A global recover y, resilience in UK activity and a surprise pickup in UK productivity have all helped.
âThese forecasts put the UK in a better position to face the moment of truth on Brexit. The decision phase of the Brexit talks will shortly be upon us. Stronger public finances give Mr Hammond more firepower to support the economy if the Brexit talks donât go according to plan.
âWe should not get carried away. These forecasts are likely to be no less fallible than earlier ones and, despite an improving trend in public borrowing, the burden of debt in the UK is still at its highest in over 50 years.
âTodayâs statement means deficit reduction is, at last, on track but it does not mark the end of austerity.â
Professor Peter Urwin, Professor of Applied Economics at Westminster Business School
âDespite immense pressure to loosen the purse strings, Philip Hammond ensured his Spring Statement was a non-event. Although, at first gla nce, conditions may have seemed right for increased spending.
âSince November the Office for Budget Responsibility (OBR) has brightened its fiscal outlook, giving the Chancellor an âunexpectedâ Â£10bn, while productivity picked up in the second half of 2017, and better economic news since January raised growth forecasts for 2018. However, this recent economic good news is only a slight revision, rather than a fundamental rethink. The OBR feels the productivity boost looks odd; the âextraâ Â£10bn is money we didnât borrow, rather than money we actually have, and revisions to 2018 growth are minimal, simply reversing the over-confidence of last yearâs forecasts.
âThe âupsideâ is therefore minimal, but the âdownsideâ is substantial; the Chancellor knows a Brexit hit will arrive at some point. As the governmentâs current position in talks with the EU is continued obfuscation on free movement, the Northern Ireland border and trade, the âhitâ has likely been kicked into 2019. The powder is being kept dry for this battle."
- More about:
- Philip Hammond
- Spring Statement