UK Budget: Higher revenues, higher spending – TDS

According to analysts at TD Securities, UK’s budget was broadly in line with the March Update as in spite of higher revenues, net borrowing figures were left largely unchanged on the back of higher spending commitments, with £140bn borrowing expected over the next five years, versus £147bn in March.

Key Quotes

“The deficit/GDP ratio is broadly unchanged from the Spring Update, falling to 0.8% in 2023/24 from 1.9% in 2017/18.”

“As a share of GDP, the debt is expected to fall from 85% in 2017/18 to about 74% in 2023/24. The profile is about 3ppt lower in 2022/23 than the Spring Update, in part due to the strong positive revenue shock this year, and slightly stronger economic growth over the forecast.”

“The OBR’s economic growth forecasts were revised up a notch, but remain weak on a historical basis. Growth next year was upgraded to 1.6%, while growth beyond sits around 1.5%, a hair weaker than the BoE’s latest August forecast.”

“Budget was short on major policy announcements, as the UK government sees through the final months of Brexit negotiations.”

“Assuming successful passage, the government’s attention will soon return to Brexit, with a further push toward a deal on the UK side, and a revised proposal on the Irish border backstop soon likely from the EU.”