This is the March 2012 issue of our regular UK Economic Outlook report. In addition to our usual detailed assessment of UK economic trends and prospects, set within a global context, this issue includes special features relevant to the forthcoming 2012 Budget and the longer term direction of UK economic policy:
Whilst many uncertainties remain, our main scenario is for modest Gross Domestic Product (GDP) growth in the UK of around 0.6% in 2012, picking up later in the year and into 2013, when we project growth rising to around 1.8%. But have you stress-tested your business plans and valuations against the possibility of a double dip recession if there are more problems in the Eurozone and/or significant further rises in world oil prices?
We expect the budget deficit to come in below Office for Budget Responsibility (OBR) forecasts this year, but this may just be a temporary, so we would expect the Chancellor to bank rather than spend most of these gains in the Budget. In the longer term, we expect the government to meet its fiscal mandate but only by a relatively small margin of error so there is no room for complacency on the public finances.
Instead we think the focus of the Budget should be on supply side reforms aimed at boosting long term economic growth through measures such as reform of business regulation and planning, tax reform, and measures to boost youth employment.
Please download the report to see the full analysis.