UK Deficit Now at Lowest Level Since 2008

Posted by siteadmin on Monday 1st of May 2017.

The UK’s borrowing declined by £20bn, to reach £52bn in the year ending in March 2017. The independent Office for Budget Responsibility (OBR), which closely monitors the government’s economic forecasts and performance, believed the figure would be slightly lower at £51.7bn. This was therefore the figure offered by the Chancellor of the Exchequer, Philip Hammond, in his last Spring Budget in March. The OBR cautioned at the time, that they believed the deficit would continue to rise as anticipated tax receipts would decline in the following quarters.

Over the period covered, as a percentage of the Gross Domestic Product (GDP), Government borrowing was 2.6% in the last financial year. This was as forecast by the OBR. To put this recent performance into perspective, just after the financial crisis, the government’s borrowing accounted for 10% of GDP.

Whilst good news, the Chancellor warned that under his watch he wanted to reduce the deficit at a slower pace than that declared by his predecessor, George Osborne. He has also given indications that there is a possibility of the Conservative Party, in their forthcoming party manifesto, dropping their 2015 manifest promise not to increase national insurance, income tax, or even VAT in the five-year term following the June election.

Another factor at play is the rise in UK inflation, which touched 2.3% last month, higher than the 2% target set by the Bank of England. Such inflationary pressure will have a negative effect on consumer spending and, ultimately, the country’s GDP performance moving forward.

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK.