Wednesday, February 28, 2024
HomeftseJeremy Hunt Announces Bigger-Than-Expected Social Security Cut to Boost UK Economy

Jeremy Hunt Announces Bigger-Than-Expected Social Security Cut to Boost UK Economy

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British Finance Minister Jeremy Hunt has announced a larger-than-expected cut in social security contributions and made incentives for business investment permanent in an effort to accelerate the country’s sluggish economy. The pound fell against both the dollar and the euro, while blue-chip stocks remained in negative territory. However, shares in pubs experienced a significant rally after Hunt unveiled plans to freeze duty on alcohol until August of next year.

Hunt cited the latest projections from the Office for Budget Responsibility (OBR) and stated that UK growth is projected to reach 0.7% in 2024, far below the forecast of 1.8% expansion for next year that was made in March. The reaction to the budget announcement was relatively limited, with markets showing mild responses in both equity markets and the pound.

Experts have expressed mixed opinions on the budget, with some highlighting concerns about the UK’s economic outlook. Charles Hepworth, Investment Director at GAM Investments, noted that the OBR’s downgrade of UK GDP growth for next year is largely due to the impact of a stagnant labor force post-Brexit. Thomas McGarrity, Head of Equities at RBC Wealth Management, expressed caution about the UK economy, emphasizing the risk of stagflation.

Matthew Ryan, Head of Market Strategy at Ebury, stated that most of the policy changes announced were either expected or seen as having minimal impact on the economic outlook. Michael Field, European Market Strategist at Morningstar, highlighted the negative macroeconomic perspective of the autumn statement, with GDP growth forecasts slashed and inflation forecasts increased. However, Field also noted that the budget may be mildly positive for consumers, as benefits are rising at a higher rate than expected and could help offset the impact of inflation.

The budget also addressed the housing market, with plans to make it easier for councils to fast-track applications for infrastructure projects and potentially convert houses into flats. However, experts in the property sector expressed disappointment, with Oli Creasey, Property Equity Analyst at Quilter Cheviot, stating that the budget lacked substance and did not address the key issues affecting the property market.

Overall, the budget was seen as a meaningful fiscal stimulus, equivalent to 0.5% of GDP, which could help boost demand. However, there are concerns about the potential impact on monetary policy, with Philip Shaw, Chief Economist UK at Investec, suggesting that it could delay the point at which interest rates are lowered. Hunt’s plan to implement full expensing was seen as a major boost to UK industry and the longer-term macro outlook, as it aims to improve the country’s slow pace of productivity growth.

In conclusion, the budget announcement by Finance Minister Jeremy Hunt aimed to address the sluggish UK economy through various measures. While some experts expressed concerns about the economic outlook, others saw the budget as a meaningful fiscal stimulus. The reaction in the markets was relatively limited, with the pound falling and blue-chip stocks remaining in negative territory. The budget also included measures related to the housing market, but these were met with disappointment by experts who felt they lacked substance.

More detail via Yahoo Sports here… ( Image via Yahoo Sports )

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