Officials set for U-turn over growth forecast

BUDGET officials are set to backtrack on negative growth forecasts for the UK economy just months after they were downgraded in an embarrassing about-turn. The Office for Budget Responsibility (OBR) slashed predictions in November and warned that the deficit would rise in April.

However, economists expect the watchdog to reverse its predictions thanks to stronger tax receipts and a resilient economy in the wake of the Brexit vote. A hike could shrink the deficit and hand Philip Hammond, the Chancellor, a £15 billion windfall as there are likely to be margins of £30 billion instead of the projected £15billion that was announced in November, said Martin Beck at the EY Item Club.

“The OBR may have turned negative on productivity at just the wrong time, as the latest two quarters of higher productivity growth are the strongest since 2008, so they might have to backtrack on that as well,” Mr Beck added.

Britain’s services industry is booming, with profits rising at the fastest pace since November 2015, according to a Confederation of British Industry survey. Meanwhile, confidence among businesses is growing, with a further pick-up anticipated in the coming three months.

Bigger-than-expected tax receipts in January have helped put the Government on track to borrow around £45 billion this financial year, down from the OBR’S £49 billion forecast. The OBR acknowledged borrowing “will undershoot our November forecast by a significant margin”. Full story: Business Page 1