Economic growth continues to stutter
Despite Hammond (pictured above) opening his statement by claiming the UK economy “continues to confound those who talk it down,” his GDP numbers were not particularly reassuring.
In March, Hammond backed 2% growth in the British economy for 2017. However, that prediction has now been downgraded to just 1.5%. And he says growth is going to slow steadily over the next three years (2018: 1.4%, 2019: 1.3%, 2020: 1.5%) before rising again slightly to 1.6% in 2021/22.
This negative backdrop is hardly what’s needed heading into the uncharted waters of Brexit. In fact, this is the first time in modern history that the official UK GDP growth forecasts are below 2% every single year over the forecast horizon.
Preparing for Brexit
The British government plans to set aside £3bn for Brexit preparations over the next two years in order to prepare for “every possible outcome”.
Hammond says there has already been £700m spent on the negotiations process and that he is ready to allocate further money if needed.
In terms of the progress of the actual Brexit negotiations, Hammond confidently stated: “No one should doubt our resolve.”
Whether this will be reduce Brexit concerns among British businesses is another matter entirely.
Business rates to be tied to CPI
In a potentially positive move for marketers, Hammond announced rises in business rates will now be pegged to the Consumer Prices Index measure of inflation rather than the higher Retail Prices Index. The switch has been brought forward by two years and will start happening from 2018.
Helen Dickinson, CEO of the British Retail Consortium, reckons retail brands will welcome this move. She explains: “It’s clear that the Chancellor has listened to the retail industry and the growing chorus from across business and commercial life who have spoken up in favour of action to mitigate rising rates bills. Crucially, this relief will unleash investment that retailers want to direct towards the needs of their customers.
“This will be particularly critical at a time when shoppers’ disposable income is being squeezed further and the growth projections for the economy have been downgraded.”
Tax relief for the alcohol industry
Hammond also revealed duty on beer, cider, wine and spirits will not rise. However, duty will still increase on high-strength, low-cost drinks such as white cider.
The Chancellor explained: “Recognising the pressure on household budgets and backing our Great British Pubs, duties on other ciders, wine, spirits and on beer will be frozen.
“This will mean a bottle of whisky will be £1.15 less in 2018 [due to inflation] than if we had continued with Labour’s plans.”
The Wine and Spirits Trade Association’s chief executive Miles Beale welcomed the move: “We are pleased that the Chancellor has found his festive spirit & listened to the call from the WSTA and its members and has frozen wine and spirit duty.
“He has shown the government is in touch with what consumers want & is supporting an industry which is a real asset to British business.”
Even if the economy is set for a depressing ride over the coming months, at least we won’t be spending more on drowning our sorrows, eh?
An investment in fibre optic broadband and AI
There will also be a £500m investment for 5G mobile networks, fibre optic broadband and artificial intelligence, with an additional £540m set aside to support the growth of electric cars, including opening more charging points.
Hammond said it was important the government continued to support technological progress throughout the Brexit process and pledged a further £2.3bn for investment in research and development
The AI funding will also support startups, with the number of new PhD students in the field set to reach 200 annually. The Chancellor stated “A new tech business is founded in Britain every hour, and I want that to be every half hour.”
Summarising today’s Budget, the Advertising Association’s CEO Stephen Woodford says there is more positive than negative news for the marketing industry.
He concludes: “We welcome the measures in today’s Budget that contribute to overall business growth and growth in the advertising sector. Specifically, we welcome the Government’s commitment to the Industrial Strategy and await further details on sector deals in due course.
“The Advertising Association has been clear in its wish to see a deal for the creative industries to build British advertising’s profile as a world-class hub.
“We also welcome devolution measures with local funding of the Metro Mayors that could support local growth initiatives across the UK. There is a great opportunity to drive growth by targeting SMEs by supporting the increased R&D tax credit investment through brilliant advertising that builds fame for all this new IP.”