United Kingdom nudges up 2018 growth forecast - Chancellor

Darnell Taylor
March 13, 2018

Britain's sluggish economy will grow slightly more quickly than previously thought this year in the run-up to Brexit, lowering the government's expected borrowing, chancellor of the exchequer Philip Hammond said on Tuesday.

In today's Spring Statement, Mr Hammond confirmed that London would get £1.67 billion to build 27,000 more affordable homes by the end of 2021/22.

John McDonnell, the shadow chancellor, gave a robust response to the speech, criticising the "indefensible spectacle" of a chancellor "failing to lift a finger" to help struggling local authorities and the NHS.

Citing the success of the five pence plastic bag levy, the Treasury will be gathering evidence from environmental organisations, businesses and individuals on how the tax system can be used to reduce the UK's reliance on plastics.

On housing, the Chancellor said the Government was working with 44 authorities who have bid for a share of the £4.1 billion housing infrastructure fund.

Sarah Hewin, chief economist for Europe at Standard Chartered, said the latest forecasts announced by Hammond looked sub-par:"The surprise for many people is how little has changed.it's a pretty weak trajectory".

He said "substantial progress" has been made in Brexit talks.

The predictions, made by Office for Budget Responsibility, would put the United Kingdom among the slowest among major economies as global growth picks ups, and are also drastically more pessimistic than those from before the Brexit referendum.

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Inflation hit 3.1% in November 2017, but the OBR predicted it had reached its peak.

Economic growth in 2017 was recorded at 1.7%, higher than the 1.5% predicted by the OBR in November's Budget, where it expected growth to fall to 1.4% in 2018 and 1.3% in 2019 and 2020.

Debt is forecast to be 1% lower than expected at the time of last autumn's Budget, peaking at 85.6% of GDP in 2017/18, before falling gradually to 77.9% in 2022/23.

By 2021 the growth forecast was 1.4 percent, compared with a previous forecast of 1.5 percent.

Philip Hammond has said there is "light at the end of the tunnel" for the United Kingdom economy, with the government's official forecaster upgrading short-term growth projections and predicting falls in inflation, debt and borrowing - but warning of the growing impact from Brexit in future years.

His deputy Liz Truss said there would be no red box, no rabbits out of the hat and no tax changes.

"Today's brief address will likely see the first full analysis of Brexit's impact on United Kingdom public finances, good news in terms of lower public borrowing and economic growth higher (but not necessarily an end to austerity), as well as announcement of a range of consultations on issues such as tax for small businesses, inheritance tax for individuals and a levy on "single use" plastics", said Accendo Markets analysts Mike van Dulken & Henry Croft.

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