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Spring Statement: Light at the end of the tunnel

Chancellor Philip Hammond says there is “light at the end of the tunnel” for the UK economy as he delivers an upbeat assessment of the outlook.

Henry Brennan

in Features


The UK economy is set to grow faster than expected in 2018, as the government prepares to increase public spending when it comes to education, skills, and infrastructure.

Chancellor Phillip Hammond delivered the government’s first spring statement to the Commons in which he gave an update on the overall health of the economy and the Office for Budget Responsibility (OBR) forecasts.

The UK economy has grown every year since 2010, he said, and the manufacturing sector is “enjoying its longest unbroken run of growth” for 50 years.

The Office for Budget Responsibility (OBR) has revised up its growth forecast for 2018, from 1.4% to 1.5%. Expectations remain for the economy to expand by 1.3% in 2019 and 2020 but the OBR has now revised down its expectations for 2021, from 1.5% to 1.4%, and for 2022, from 1.6% to 1.5%.

The OBR also expects inflation to come back down to the government’s 2% target within the next 12 months. UK consumer price inflation currently stands at 3% - close to November's six-year high of 3.1%. Jeremy Spain, Charles Stanley’s bond analyst, explains whether investors should be concerned about the current rate of inflation here.

The chancellor reaffirmed a commitment to a £44bn investment programme announced at the Autumn Budget, which is aimed at raising housing supply to 300,000 a year by the mid-2020s. The chancellor also claims that an estimated 60,000 first-time buyers have benefited from the Stamp Duty relief announced at the Autumn Budget, despite OBR estimates of a “limited impact”  at the time of its announcement.

The tax-free personal allowance will rise to £11,850 from April 2018. The government estimates that in 2018/19, a typical taxpayer will pay £1,075 less income tax than in 2010/11. For more information on annual tax allowances and exemptions, click here.

The chancellor singled out the UK technology sector and said that it is attracting investment from all over the world. UK technology firms currently make up less than 1% in the weighting of the FTSE All-Share. Chief investment commentator Garry White asks whether this is a problem for UK investors here.

Looking ahead and the chancellor said he will use the next Autumn Budget to set out spending totals for 2020 and beyond. If the improvement in public finances continues, he indicated there will be more to spend on public services.

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