The latest economic forecast from the Office for Budget Responsibility (OBR) shows a modest upgrade on the previous predictions published at Autumn Statement 2016.
Growth has now been forecast at 2% in 2017, up from the 1.4% previously predicted. The new forecast shows this will slow to 1.6% in 2018 before picking up to 2% in 2021.
Borrowing in 2016/17 is forecast to be £51.7 billion. This is £16.4 billion lower than forecast last autumn.
Public sector net borrowing is predicted to fall from 3.8% to 2.6% this year.
Inflation has been forecast at 2.4% in 2017, then 2.3% in 2018 and 2% in 2019.
Despite the short term improvements to growth and borrowing, the outlook for family finances and wage growth remain key challenges over the next few years.
Torsten Bell, director of the Resolution Foundation, said:
“Expectations for lower productivity and pay growth, coupled with rising inflation, mean that average earnings are on course to remain below their pre-crisis levels by 2022 – representing an unprecedented decade and a half of lost pay growth.”
Suren Thiru, head of economics at the British Chambers of Commerce, said:
“Over the long-term, more needs to be done to achieve a sustainable strengthening and broadening of the UK’s tax base, including greater support for firms looking to invest, recruit and grow their business.”
Contact us today to discuss how these changes may affect you and your business.