Chancellor Phillip Hammond has finished his first official autumn budget and despite it feeling more like winter, there are a few good announcements for the majority of us. Describing the budget as one to get the UK “match-fit” for Brexit, Mr Hammond made some major announcements on housing, benefits and tax which should give a much needed boost to UK PLC.
Bad news is that our national debt is scheduled to reach 90% of GDP or 2 trillion pounds and growth forecasts have been revised down. This is mainly due to the expected Brexit factor which has already reared its ugly head with Sterling losing 20% of its value since this time last year. This will of course really kick in when we formally trigger article 50, so be prepared for another drastic fall around March next year (one for the spread betters to watch out for).
Headline policies from the budget are as follows:
- Fuel duty freeze – cancels the planned 2p rise
- Income tax threshold rising to £11,500 in April 2017 – boost to lower earners
- Minimum/living wage raised from £7.20ph to £7.50 in April (what a difference that will make to those living in London)
- 100,000 new homes to be built and an additional 40,000 in high demand areas
- ban on letting agents fees – good for tenants, will that put rents up though?
- Investments nationwide to roll out 5g internet
- Spring will see it’s last budget, from then on we will only have one budget per year in Autumn.
Growth forecasts have been revised down and we are no longer seeking a budget surplus in 2019/20, however Chancellor Hammond is still looking to balance the books as soon as possible, realistically though it is anyone’s guess when that will happen.
In all honesty, there is a little deja vu going on here (and i’m sure i’m not alone in thinking this); the Tories have been making these “cuts” to the economy for years, yet spending has increased overall and out debt mountain has become huge. Each of George Osborne’s budgets had growth revised down and spending going up. On the other side of the coin you have Labour stating that they will spend £500 billion “improving” the economy, despite the figures showing that higher public spending means more debt and hardly any growth. Since both of our two main political parties are spending willy nilly and never seem to get growth predictions (or any other) right, wouldn’t it be nice if we actually had some competent people running our country for a change?
One of the best things to come out of the budget was that we are going to pump up to £2 billion into research and development each year by 2020. This is something the UK needs to be a pioneer in, just as much as we are being one of the leaders in the Fintech revolution. Superfast Broadband is essential to businesses up and down the country and would make the UK ideal for future investment.
Looking at how the markets have responded to the budget; GBP has increased against the Euro jumping from €1.1649 to €1.1801 today hitting a 2 month high. Against the Dollar the pound has climbed from $1.2377 to $1.2477 today, so overall Sterling has had a positive outcome from this budget.
The excitement doesn’t stop at the budget though; next week we have ECB President Draghi speaking on Monday, preliminary US GDP figures announced on Tuesday and US non farm payroll on Wednesday. The UK has bank stress test results and manufacturing PMI on Thursday, alongside US Unemployment claims. These are the major economic news events which should create some movements in currencies, but the week is busy with lots of other news from the Eurozone, Canada, New Zealand and Australia, so plenty to keep your eyes on.
Christmas is round the corner and black Friday is here tomorrow, hopefully these will give the UK a much needed boost and help everyone forget about Brexit, the Trump Presidency and a very uncertain 2017.
So if you have any last minute Christmas stock purchases from your overseas supplier, or you want to talk about travel money for your Christmas getaway, feel free to contact Currency Pal and we’ll dicuss your options.