Spring Statement 2019 - Review

Last week the Chancellor of the Exchequer, Philip Hammond, delivered his Spring Statement to Parliament. While the ongoing Brexit uncertainty resulted in the event being a more muted affair than usual, the Chancellor’s announcements still had important implications for business.

First, the Office for Budget Responsibility (OBR) downgraded its forecast for growth in 2019 to 1.2%, from the 1.6% announced at the Autumn Budget last October as uncertainty takes its toll on business investment – as shown in the CBI's economics surveys. Looking further into the forecast horizon, the OBR maintained its prediction of 1.4% growth in 2020 and revised up its forecast for 2021 to 1.6% from 1.4% in October.

Alongside these forecasts, the Chancellor also announced surprisingly positive news on the state of the public finances, with borrowing revised downwards because of stronger than expected tax receipts. Debt is now also forecast to fall further than it was at Autumn Budget, giving the Chancellor over £26 billion in headroom against his fiscal rules. However, this increase will be short-lived, with the reclassification over student loans reducing this figure by £15 billion.

Second, the Chancellor made some positive announcements regarding the clean growth package. The Clean Growth Strategy announced the government’s ambition to provide up to £20 million to support a new clean technology early stage investment fund. This package included measures to future proof all new build homes with low carbon heating by 2025, and consultations into how to help small businesses reduce their energy bills and carbon emissions. Business has welcomed the focus on how to move to a low carbon economy and is an area of focus for the CBI ahead of the Spending Review consultation period later this year.

Finally, alongside his economic update, the Chancellor also used his statement to publish the Furman Review which looks into competition in the digital economy. The UK’s tech sector is the envy of the world. Business is clear that government has an important role to play in supporting continued growth – particularly in ensuring any new rules or regulations are in-step with developments at the international level.