He went on to say that the Washington-based International Monetary Fund (IMF) had stated that the UK economy had “confounded commentators at home and abroad with its strength and resilience”.
However, we live in uncertain times and the UK faces a slowing economic recovery and the ever-present Brexit effect. Mr Hammond has recognised that the previous deficit reduction plan would require longer than this parliament to achieve; the new target of a cyclically adjusted 2.0% deficit by the end of the parliament looks more realistic and attainable.
The Brexit effect
After the good news, it was almost inevitable that there would be some less good news to follow, and there was. Britain will need to borrow another £122 billion over the next five years, following the Office for Budget Responsibility’s calculation that Brexit will come with a price tag of £58 billion.
But in moves designed to further stimulate the economy, Mr Hammond chose to add to the debt by announcing an extra £26 billion of borrowing to fund an investment spree that includes housing, transport and infrastructure projects.
Business rates relief is to be permanently increased providing crucial support for small businesses. It’s estimated that 600,000 small firms will be taken out of the rates system altogether.
A National Productivity Investment Fund
There will be a £23 billion fund to provide Wi-Fi, roads and rail links to keep Britain on the move and help improve our lagging productivity.
In another measure to get the UK moving, there’s to be an additional £1.1 billion earmarked for road maintenance and upgrades outside the Strategic Road Network, and a further £220 million to be invested in improving pinch points on motorways.
More than £1 billion will be used to back private investment in the creation of a full-fibre digital network and to support trials of the 5G wireless technology. From 1 April, new fibre broadband will benefit from 100 per cent business rates relief for five years.
Research and Development
There will be an extra £2 billion by the end of this parliament to support much-needed R&D. there will be £100 million to establish greater technology-driven collaboration between business and universities.
In keeping with his wish to underline that the UK is open and ready for business, the Chancellor confirmed plans to cut Corporation Tax to 17%, the lowest figure of any G20 nation, in April 2020.
And there was much more besides including fuel duty frozen for the seventh year in a row, increases in personal tax allowances and an uplift in the national living wage from £7.20 to £7.50, both in April.
Reaction from the business community was in the main very positive. Whilst the statement wasn’t big on sound bites or headline-grabbing initiatives, and given that the Chancellor had less room that he would have liked for manoeuvre, he managed to put in place some welcome initiatives that should serve to stimulate the economy as the UK faces its future outside the EU.
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