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A spring in the step of the UK economy?

by | Mar 13, 2018

The Chancellor didn’t spring any huge surprises in his first Spring Statement.

The Chancellor painted an upbeat assessment of the UK economy in his first Spring Statement. In his speech, the Chancellor noted a small improvement in near term economic conditions compared with the position at the time of November’s Budget; this is as a result of a fillip from a stronger world economy.  However, the outlook remains very modest with growth expected to be 1.5% in 2018 followed by two years at 1.3% per year.  The jobs position is unchanged from November with around half a million new jobs predicted by the end of 2022. CPI inflation is anticipated to fall to 2.4% by year end and then hover around 2%: this is unchanged from November.

 

The OBR forecasts are based on market expectations of interest rates which have risen between the two events. The OBR paints a very subdued outlook for the UK but CBRE’s view is more cyclical.  Our own view is for stronger GDP growth in 2018 (1.8%), yet by 2020 we forecast lower UK growth of just under 1%, reflecting a US slowdown. This will be followed by more rapid growth from 2021 as the world economy picks up and the future relationship with the EU becomes clearer.

 

With very little substance in today’s statement, the most important issue for the real estate sector was the announcement that the Treasury was bringing forward the revaluation of business rates to 2021 (previously due in 2022). This will mean the first three-year revaluations will take place in 2024.  This change is probably to avoid a clash with the Election due in 2022. The change is broadly welcomed by CBRE, but we would urge the Chancellor go further and simplify the current appeals mechanism allowing businesses to rectify errors with current rates bills.

 

In addition, Philip Hammond confirmed that the initial draft report following Sir Oliver Letwin’s review of build out (the gap between permissions granted and homes built) would be published in June 2018.

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