Tigger happy: “Light at the end of the tunnel” despite tepid outlook

There were few fireworks for investors and savers, but still the Chancellor of the Exchequer promised “light at the end of the tunnel” as his Spring statement predicted falls in borrowing, inflation and debt.

Despite previously being compared to “Eeyore”, Philip Hammond said he was feeling “Tigger-like” as he began to give a more upbeat statement around the economy than his Budget of last November.

Economic growth was 1.7% in 2017 according to the Office for Budgetary Responsibility (OBR), higher than forecasts of 1.5%, prompting Mr Hammond to declare: “Forecasts are there to be beaten.” Growth was also forecast upwards for 2018, and unchanged at 1.3% for 2019 and 2020. However, the statement gave a gloomier longer-term outlook, with growth was revised from 1.5% to 1.4% for 2021 and from 1.6% to 1.5% in 2022.

Chris Price, Investment Specialist at investment management and stockbroking firm Redmayne Bentley, said: “As expected it was a rather anodyne statement, with nothing said regarding taxation and spending, which is the crux for the everyday person and definitely nothing regarding savings and investments. Overall, the main message is that the economy is performing better than expected, although the outlook still tepid with growth in early 2020’s lower than this year’s forecast.”

Inflation is expected to fall to the Bank of England’s 2% target by the end of 2018, with real wage growth expected to return. Mr Hammond said: “Real wage growth is expected to be positive from the first quarter of 2018/19, and to increase steadily thereafter.”

Mr Hammond also confirmed the tax-free personal allowance – the amount people can earn before paying income tax – will rise to £11,850 in April 2018.

The Pound was lifted by the upbeat forecasts, rising 0.42% against the US dollar to US$1.40 during Tuesday afternoon. However, after an overall upwards trend during the past week, the FTSE 100 dipped following the statement, down around 0.8% at the time of writing.

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Please note, past performance and forecasts are not reliable indicators of future results or performance.