In advance of the Budget many analysts suggested the Chancellor should deliver a “cautious” and “steady as she goes” message. The UK is engaged in Brexit negotiations, there are concerns about the UK productivity, rising inflation, a recent interest rate rise and the impact these may have on the future direction of the UK economy. As such, it would be perceived to be a very bold Budget if Philip Hammond announced that he was proposing a new strategy of borrowing lots of money and raising taxes.
Early in the Budget speech the Chancellor downgraded the UK’s growth forecasts over the coming years. This will have a consequence of lower than expected tax revenue which has to be funded by borrowing or increasing taxes.
Later in his speech, Philip Hammond announced he was adopting a “balanced approach.” There will be investment in skills, training and technology to boost productivity and enable the UK to be at the forefront of technological innovation. Incentives have been offered to knowledge based companies and tax relief for individuals investing in such companies.
In reaction to the Budget, nothing too dramatic has happened to currency exchange rates and the FTSE. In the light of the poor growth forecasts this is a positive response as it could have been so much worse.