Having signalled an end to austerity in the Budget of October 2018, Chancellor of the Exchequer Philip Hammond struck a slightly more restrained tone in the Spring Statement of March 2019. Although he hailed the better-than-expected borrowing forecasts from the Office for Budget Responsibility (OBR), the UK economy appears on track to achieve its weakest year of economic growth since 2009.
“Crucially, the OBR’s predictions are conditional on an orderly Brexit”
Economic growth has slowed since the Budget in October 2018, both in the UK and around the world, according to the OBR. Nevertheless, tax receipts have performed better than expected towards the end of the current fiscal year, contributing to a welcome medium-term boost to the UK’s public finances.
The OBR cut its growth forecast for this year from 1.6% to 1.2% as Brexit-related uncertainties took their toll. In response, the Confederation of British Industry (CBI) commented: “This year’s forecast downgrade brings the danger of “no deal” to the UK economy sharply into view. It must be avoided”.
However, the OBR believes that economic weakness is likely to prove short-lived: looking further ahead, the economy is expected to grow by 1.4% next year, and 1.6% for each of the following three years – slightly higher than previously predicted. Meanwhile, the OBR expects the Government to borrow £29.3 billion in 2019/20, £21.2 billion in 2020/21, £17.6 billion in 2021/22, and £14.4 billion in 2022/23, reaching £13.5 billion in 2023/24 and representing its lowest level in 22 years.