Some positives from Hammond, but report lays bare uncertainty for business
Just when you thought Brexit couldn’t be any more of a shambles, the uncertainty it has caused and the impact this has had on business was made clear in yesterday’s Spring Statement. Chancellor Philip Hammond confirmed that the UK economy is growing and debt declining and this should be welcomed. But he was right to warn that a disorderly exit from the EU would likely lead to a significant deterioration in economic conditions.
It is now clearer than ever that a no-deal Brexit by default will have severe short-term implications for the pound, prices in the shop and the public finances. The Office for Budget Responsibility’s economic and fiscal outlook report issued alongside the Spring statement set out that the growth in tax receipts the Chancellor has enjoyed, for example, will only continue to do so if we achieve a deal with Europe.
The OBR report lays bare the impact that Brexit uncertainty has had on business performance so far. The independent watchdog has cut its economic growth forecast to 1.2 per cent from 1.6 per cent. Business investment shrank considerably in 2018 to just 0.5 per cent of GDP. Meanwhile, the OBR bullishly predicts this will rebound to 2.3 per cent this year. This will only happen if we have a practical plan in place for the UK’S exit from the EU.
Mr Hammond offered some positive surprises. We are very pleased of the confirmation that the University of Edinburgh will receive £79 million for its ARCHER2 system. This is a real vote of confidence in the university’s capabilities in computational science and will be essential for the development of research into important economic sectors in Scotland such as medicine, climate science and aerospace.
Likewise, the Exchequer’s £260m contribution, alongside £85m from the Scottish Government to the Borderlands Growth Deal, will go a long way to delivering real economic benefit to the south of Scotland.
There is no doubt a cloud of uncertainty hangs over the head of the UK economy. The Chancellor has confidently insisted a deal would be reached, but this needs to be backed up with conviction.
● Dr Liz Cameron is director and chief executive of Scottish Chambers of Commerce