The Government has admitted that economic growth is likely to be much slower than previously forecast after the UK voted to leave the European Union.
Chancellor Philip Hammond, giving his first Autumn Statement, said the Office for Budget Responsibility (OBR) now predicts the economy will grow by 1.4% in 2017, down from the 2.2% it predicted in March. And it expects growth to be 2.4% slower over the next five years as a result of Brexit.
The OBR has also attempted to calculate the impact of the EU referendum. It estimates the vote will cost £58bn over the next five years due to lower migration and weaker productivity. It also expects the Government to have to borrow £122bn more than originally thought due to the economic slowdown.
The forecasts are bad news for business and marketers reliant on economic growth for their own success. The fallout from Brexit has already seen brands cut back on advertising spend, particularly in TV with ITV expecting a 7% fall in revenues this year and the IPA’s quarterly Bellwether report predicting ad budgets will fall next year.
The latest figures suggests Brexit could hit the marketing industry still further as negotiations to leave start to take place. However, it does appear that the UK economy will avoid going into recession.
There was little in the budget that specifically addressed the marketing industry, although direct marketers should note that Hammond announced a consultation on how best to ban pensions cold calling.
There were however promises of a further £2bn a year investment in research and development and £1bn in digital infrastructure to make the UK a leader in 5G. There will also be a £23bn productivity fund that will be distributed to help deliver a “high wage, high skill economy that will deliver higher living standards”.
Corporation tax is also set to fall from 20% now to 17% by 2020, while the living wage will increase to £7.50 an hour and both the tax-free and 40% tax threshold will increase.
ISBA welcomed the latter moves in particular. “The Autumn Statement is a classic management of a difficult economic situation. The global economy is not in a good state and price pressures on business and consumers is rising. The Chancellor’s natural caution is a valuable asset for business,” says Ian Twinn, ISBA’s director of public affairs.
“Yes money does need to be spent to help get the economy moving, but too much, too soon would only add to our trouble and result in higher taxation and a loss of global competitiveness, his announcement therefore of a move towards 17% corporation tax is particularly welcome. Equally the increase in spending on broadband helps to improve the UK infrastructure.”