Page 4 - ISO April 2023

INVESTMENT STRATEGY QUARTERLY

Can the UK Escape the Economic Slow

Lane?

Jeremy Batstone-Carr, European Strategist, Raymond James Investment Services Ltd*

As every Chancellor of the Exchequer surely knows, the a hitherto listing ship, provided the opportunity for the implanting
best Budgets are those in which the incumbent struts and of foundation stones aimed at constructing a new economic
frets their hour upon the stage and then are seen (or heard) framework and faster economic growth in the future. For the
immediate present, a package measures widely trailed in
no more. On this occasion Mr Jeremy Hunt “lucked out” advance, amounted to a £21.9bn “giveaway” over the 2023/24
insofar as his speech and its implications for the UK econo- fiscal year, rather more generous than had been anticipated.
my’s near-term outlook were entirely overshadowed by Beyond that, measures costing the Treasury a net £10.4bn out to
events unfolding in the banking sector, both in the United 2027/28 was unequivocally better news than pessimists had
expected. In passing, and of interest to everybody, the unques-
States and Europe. However, for those sufficiently inter- tionable highlight was the decision to cancel the scheduled 20%
ested in prospects for embattled UK economic activity increase (£2,500 to £3,000) in the Energy Price Guarantee as it
there was much to pore over. Billed as a “Budget for relates to all utility bills from 1st April. The subsidiary decision
Growth” the measures announced do go some way towards to scrap a 23% increase in forthcoming fuel duty was also well
received and will further ease the country’s long-standing cost
extricating the country from its immediate travails, how- of living crisis.
ever, a coherent plan for the longer term is required over
and above laying the foundations for the next election In consequence of these measures the Office for Budgetary
Responsibility (OBR) is no longer forecasting a recession in 2023
campaign. and growth estimates for 2024 have been marked higher. This is
highly significant as the OBR’s previous assertion, that the UK
Following the UK administration’s autumn crisis, the first
requirement deemed essential for the incoming Chancellor was economy would enter recession in Q3 of last year and that it
a cool nerve and a steadying hand on the country’s purse strings. would last for five quarters garnered considerable negative
Mr Hunt has so far excelled himself, delivering sensible eco- attention. It is now thought likely that while a slide into mildly
nomic prescriptions when the economy needed them most. negative territory is inevitable over the first quarter of the cur-
Fiscal credibility may not yet be fully restored, but the return to rent year (once lagging data is made available), a slow revival
calmer waters for the domestic gilt-edged government bond should take place thereafter to the extent that real GDP growth
market and sterling’s rediscovered stability on the foreign will emerge at just -0.2% once data for 2023 is published, rising
exchanges illustrate the extent to which important steps are to +1.8% in 2024. These upwardly revised expectations are
being taken in the right direction. +1.2%-points and +0.5%-points respectively higher than
November’s forecasts.
This Spring Budget, more than simply adding greater stability to

*An affiliate of Raymond James & Associates, Inc., and Raymond James Financial Services, Inc.

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