Long-term growth forecasts revised down

Chancellor Philip Hammond (Credit: ParliamentLive)

The UK’s long-term growth forecasts have been revised down, despite a slight improvement in expectations for 2018.

The latest update to economic forecasts, by the Office for Budget Responsibility (OBR), estimate that while 2018 is now expected to be slightly better than forecast in November, it has slightly downgraded its forecasts for 2021 and 2022.

Chancellor Philip Hammond, delivering the spring statement, was left to say that “forecasts are there to be beaten” as he revealed the latest OBR annual GDP growth forecasts of 1.5%, 1.3%, 1.3%, 1.4% and 1.5%.

The OBR expects inflation to return to its 2% target over the next year, which would result in real wage growth, said Hammond.

The 26-minute statement had plenty of the usual politics but much fewer of the policy statements that fiscal statements of the past have had.

The Government is bringing forward its business rates revaluation by a year to 2021, when it will then start its three-year review cycle.

Hammond also launched consultations on productivity and late payments, claiming “we are the party of small business and the champion of the entrepreneur”.

£80m will be released to address the “challenges” that have resulted from the apprenticeship levy, which has caused disruption and disengagement from business.

Russ Mould, AJ Bell’s investment director, said: “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.

“Even if the stock market looks to be shrugging, the debt markets look to be pleased, judging by how the yield on the 10-year Gilt, or Government bond, has fallen back below 1.50% today, well below February’s 1.65% high.”