Spring Statement: Here’s how economists reacted to Philip Hammond’s economic update

Chancellor Philip Hammond today gave Parliament an update on the British economy based on new forecasts which show slightly lower government borrowing this year.

The Office for Budget Responsibility said borrowing will hit £45.2bn in the 2017-18 fiscal year, falling steadily to £21.4bn by 2022-23, the end of the forecast period, although the cyclically adjusted borrowing figure will rise to £46.7bn.

Read more: Hammond reveals stronger borrowing forecasts in Spring Statement

Read more: “Tigger-like” Hammond tells MPs: “There’s light at the end of the tunnel”

Here’s how the City’s economists reacted.

Low-growth trajectory

Suren Thiru, head of economics at the British Chambers of Commerce, said: “The OBR’s latest forecasts suggest that the UK will remain locked onto a low growth trajectory for the foreseeable future. While GDP growth for this year was upgraded slightly, their projections for 2021 and 2022 have been downgraded.

“It is encouraging that government borrowing is now projected to be lower over the next few years than in their previous forecast, and suggests that that chancellor will have some welcome fiscal headroom at the Autumn Budget later this year.”

A non-event to keep powder dry

Peter Urwin, professor of applied economics at Westminster Business School, said: “Despite immense pressure to loosen the purse strings, Philip Hammond ensured his Spring Statement was a non-event.”

Upside to forecasts is, however, minimal, but the downside is “substantial”, he added. “The Chancellor knows a Brexit hit will arrive at some point. As the government’s current position in talks with the EU is continued obfuscation on free movement, the Northern Ireland border and trade, the ‘hit’ has likely been kicked into 2019. The powder is being kept dry for this battle.”

A small spring in his step

Hetal Mehta, senior European economist at Legal & General Investment Management, said: “The chancellor of the Exchequer has long been keen to have only one major fiscal event a year and today’s Spring Statement was just that – a statement of the latest borrowing and growth projections without any fanfare, or new policy announcements. And yet, he had a small Spring in his step

“That said we don’t expect Hammond to go on a spending splurge in the Autumn Budget. He will likely save the extra room for manoeuvre ahead of the next election and to cushion any downside risks emerging from the UK’s departure from the EU.”

Austerity continues

Ian Stewart, chief economist at Deloitte, said: “These forecasts put the UK in a better position to face the moment of truth on Brexit. The decision phase of the Brexit talks will shortly be upon us. Stronger public finances give Mr Hammond more firepower to support the economy if the Brexit talks don’t go according to plan.

“Today’s statement means deficit reduction is, at last, on track but it does not mark the end of austerity.”

Encouragement for the Bank of England

Dean Turner, Economist at UBS Wealth Management, said the improvements were “marginal”, with future spending adjustments “still likely to be modest”.

“As the global growth backdrop holds firm, and with progress on a Brexit transition deal potentially announced next week, we believe downside risks to growth in the short-term are limited. This should encourage the Bank of England to hike rates at its May meeting.”