Commenting on the Chancellor’s vision for the future of the UK economy, Mark Gregory, EY’s chief economist, says:
“Today’s budget announcements should provide real support for the economy as we transition out of lockdown. The Chancellor has clearly learnt from developments over the course of the pandemic, describing himself as “going long”, providing support that extends beyond the roadmap for ending restrictions on activity. The combination of measures to help smooth the transition for both businesses and households will help minimise the ‘scarring’ to the economy from the pandemic, as well as the level of job losses.
“However, while the OBR now forecasts a faster short-term recovery, its long-term outlook is for relatively low growth by historic trends. There appear two reasons for this: moves to repair the public finances may create a drag on spending and corporate investment once the welcome two years of generous capital allowances expires; and there isn’t yet a compelling vision for the economy beyond the pandemic.
“Fixing the state of public finances matters, but perhaps the best way to improve these is to invest to accelerate the growth required to create the resources needed for repair. While enhanced capital allowances are generous and well designed to capture the benefits of the supply chain revolution that is already underway, proposals on building the green revolution and levelling up the UK were relatively light on both detail and new resources.
“Support for SMEs to improve their productivity is a sensible approach but, alone, will not address a major challenge. Investors are increasingly keen to understand how countries plan to enhance the resilience of their public services, enhance their digital infrastructure and create a fairer, sustainable economy. The UK still has work to do to create a convincing plan.”