There were two main conclusions to draw from today’s spring statement. The first is official confirmation the economy is expected to weaken in 2019. The OBR has revised down its forecast for growth this year to 1.2%, from 1.6% in the October Budget. This is in line with our own projection of 1.1%.
The second is the ongoing strength of the public finances. The budget deficit is now expected to come in at 1.1% of GDP this year, the narrowest since 2002. This should give the Chancellor considerable flexibility to increase spending on public services at the spending review later this year.
However, both of these conclusions are highly dependent on Brexit. A no-deal outcome could cause growth to slow much further and prompt the Chancellor to announce new fiscal spending to support the economy. His preference is clearly to deliver an Autumn Budget, not an emergency package of measures to limit the pain of a no-deal Brexit.