UK growth forecasts slashed

UK growth forecasts slashed

The UK's economic outlook is to weaken in the coming years following a series of downgrades to GDP growth from the Office for Budget Responsibility (OBR).

The figures, announced by chancellor Philip Hammond as part of today's (22 November) Budget, show the UK is only expected to grow 1.5 per cent in 2017. This is versus a prediction of 2 per cent made only in March.

The government's independent economic and fiscal forecaster, the OBR, said the main reason was weaker than expected productivity growth and lower business investment. GDP forecasts for subsequent years have also been amended.

In 2018, the OBR had expected the economy to grow 1.6 per cent but this has now been cut to 1.4 per cent. The following years up until 2021 have all also been revised down. The economy will now grow 1.3 per cent in 2019 and 2020 instead of 1.7 per cent and 1.9 per cent, respectively. In 2021, the economy is expected to grow 1.5 per cent instead of the 2 per cent.

Productivity growth should returned to 2 per cent by now as per the OBR's previous forecasts, but Mr Hammond said it remained "stubbornly low".

While sentiment over the UK's economic prospects was weakening, Mr Hammond did announce better-than-expected government borrowing and deficit figures.

Borrowing for the current fiscal year is now over £8bn lower than forecast in March, coming in at just shy of £50bn. Subsequent years will also see lower borrowing and deficit figures.

Mr Hammond said borrowing should fall to £25.6bn by April 2022, with a structural deficit as a share of GDP of 1.3 per. This figure will fall every fiscal year from the end the of 2017/18, where it will be 2.4 per cent, lower than the previously expected 2.9 per cent.

The overall Budget was a "balance" between supporting innovation, improving productivity, supporting frustrated families but retaining fiscal responsibility, according to the chancellor.

He said: "We are listening and understand the frustration of families where household spending is under pressure. But we will retain fiscal responsibility when we see our debt peaking."

Mr Hammond also said the OBR predicted a futher 600,000 jobs being created by 2022, helping reduce the number of people who remained unemployed, currently 1.4m.

In addition, he committed up to £3bn to the Brexit transition in the current Parliament and will "allocate further sums if and when needed". This is in addition to the £700m already spent by the government on leaving the EU.