In the Autumn Budget, the Government has downgraded the forecast for productivity growth, firm investment and GDP growth over the next five years. The figures are now the following:
|
Forecasted Year |
November 2017 Budget |
March 2017 Budget |
|
2017 |
1.5% |
2% |
|
2018 |
1.4% |
1.6% |
|
2019 |
1.3% |
1.7% |
|
2020 |
1.3% |
1.9% |
|
2021 |
1.5% |
2% |
This shows that the Chancellor is expecting the effects of Brexit to get harsh over the next few years. This pattern is also shown into the percentage of public borrowing over the next five years as after Brexit the fiscal forecasts look worse than forecast in March:
|
Forecasted Year |
November 2017 Budget |
March 2017 Budget |
|
2017-18 |
2.4% |
2.9% |
|
2018-19 |
1.9% |
1.9% |
|
2019-20 |
1.6% |
1% |
|
2020-21 |
1.5% |
0.9% |
|
2021-22 |
1.3% |
0.7% |
As a result of the table above, this year’s public borrowing will decrease by about £8bn, as tax revenues have been higher this year and also as a consequence of a lower public spending. However, the deficit forecast for 2020-21 should increase by more than £10bn over the March forecast, and the government has said it wants to reduce borrowing to less than 2% of national income by 2020-21. As reported by the Office for Budget Responsibility, Britain’s deficit will not be cleared until 2031 under Tory plans.
Hammond will try to reverse the OBR’s productivity growth and deficit forecasts with various incentives from the £23bn national productivity investment fund and the £5bn per year industrial strategy challenge fund for transport and infrastructure projects, as well as fostering more investment in technology, research and development.
Contact us for more information.
Alessio Menna & Michele Ammirati
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