UK stock market were trading higher as Rishi Sunak unveils budget
Chancellor Rishi Sunak unveils the British government’s tax and spending plans and the latest forecasts by the independent Office for Budget Responsibility (OBR). After which the European stock market was trading higher on Wednesday. Investors welcomed better-than-expected industry data for the eurozone and economic forecasts for the UK.
According to OBR data, the prediction of expanding the UK economy by 4% this year and by 7.3% in the next year could come to life. This will help to bring the economy into the pre-virus era by mid-2022, which is six months faster than earlier prediction. The OBR now predicts unemployment will peak at 6.5%, versus an 11.9% forecast last year.
Sunak announced £65bn as new crisis support for the business, workers, households. Also, low-income and jobless benefit top-ups worth £500 a household.
Sunak also unveiled £5bn new ‘restart’ grants and a ‘recovery’ loan scheme with an 80% government guarantee for firms to replace previous loan schemes. Income tax thresholds will be frozen and corporation tax on larger firms’ profits hiked to 25% from 2023 to reduce Britain’s public deficit, however.
“It is entirely right to be concerned at the level of the current deficit, however with borrowing costs still at fairly low levels, even after last week’s rise in gilt yields, the government can afford to be creative when it comes to time frames in narrowing the gap between taxation and spending,” said Hewson.
Tombs added: “The chancellor deferred announcing new fiscal rules until the autumn, creating uncertainty about whether additional tax rises will be needed in time.”