Britain’s finance minister delivered his annual spring statement this afternoon, in which he forecast stronger than expected growth in 2018, with public finances also improving.
The British economy has grown for five consecutive years, and exceeded expectations in 2017, despite the uncertainty around the UK’s post-EU future. In his address to Parliament, Philip Hammond forecast GDP growth of 1.5% this year, slowing to 1.3% in 2019 and 2020 before picking up again slightly to by 1.4% in 2021.
The figures for 2018 represent an upgrading of the Office for Budget Responsibility’s (OBR) forecast for growth, from 1.4% to 1.5%. The OBR also lowered its forecast for borrowing in 2017-18 to £45.2bn from £49.9bn predicted in November.
The OBR expects inflation to fall over the next 12 months, and wages to rise faster than prices over the next five years.
The chancellor of the exchequer stated that employment has increased by 3m since 2010 – the equivalent of 1,000 people finding work every day. The unemployment rate is close to a 40-year low.
In a move specifically relevant to IFAs, the chancellor also announced a consultation for investment into knowledge-intensive companies via the Enterprise Allowance Scheme.
The role of digital companies
Digital businesses were recognised in the statement as a valuable part of the modern economy. The government has has stated its intention to adjust the tax system to give a fairer result for digital businesses.
Responses from the financial services sector were mixed. Christopher Lean, chartered financial planner at Aisa International told International Investment: “As far as financial services was concerned, there was nothing in the way of new policies announced in the Spring Statement, which means previously announced policies mentioned will start to take effect, unchanged, such as the staged increases to Automatic Enrolement from April. The lack of a mention of any pension changes may be a relief to pension practitioners to some extent, though many had hoped for an increase to the Lifetime Allowance over and above what had been already agreed previously.
“The Chancellor also announced a consultation for investment into knowledge intensive companies via the Enterprise Allowance Scheme, that may be of interest to IFAs that deal with HNW clients.”
Lean added, “The forecast for lower inflation may take pressure off interest rate increases, which may have been a concern for those with larger mortgages.”
Nigel Green, deVere’s CEO, called the chancellor’s spring statement “enormously encouraging” for the financial sector, and for financial technology in particular.
Russ Mould, investment director at AJ Bell, commented, “Although Chancellor Philip Hammond failed to stick to the planned 15-minute script, he stayed ‘on message’ otherwise, reaffirming the Government’s commitment to reducing the annual budget deficit and the £41 billion annual interest bill on the overall national debt.”