Balancing the books – a Budget for business growth?


Post-Budget reflections from Trevor Williams, Lloyds Bank Chief Economist, offer insight on what businesses can take from the 2015 announcement.

About the author

Trevor Williams is the Lloyds Bank Commercial Banking Chief Economist. He is also a member of the Shadow Monetary Policy Committee and is Visiting Professor of Business and Economics at the University of Derby.

Trevor Williams

The Chancellor’s Spring 2015 speech was light on major announcements with a key message of ‘on course for prosperity’. Businesses were not, I would argue, the central theme of this Budget, which was largely focused on the wider economy and spending plans. However, it remained aligned to the core business objectives of improving productivity, supporting investment and encouraging exports.

Few surprises

The 2015 Budget didn’t diverge from what was widely expected, or indeed from what George Osborne had laid out in December’s Autumn Statement, and as a result we saw very little market reaction.

The headline figures were the Chancellor’s pledge to balance the current account deficit by 2017/18 and that public sector net debt as a share of gross domestic product (GDP) would start to fall in the coming fiscal year (2015/16). There was a cumulative reduction in public sector net borrowing (excluding banks) over the next four years, which suggests that fiscal tightening of around £0.6bn will be offset before the end of the five-year period previously stated. In short, it suggests that the squeeze on public sector spending should end sooner than suggested in the Autumn Statement and the 2014 Budget.

There were a few surprises, such as the Help to Buy ISA, the planned reduction in paper tax returns, the announcement of the diverted profit tax and a modest increase in the bank levy, but these were modest in fiscal terms and did not change the overall stance of fiscal policy.

Business measures

For businesses, there was a freeze on petrol duty and the announcement of a review of business rates, but it was the oil and gas sector that received the biggest boost. To ensure that North Sea oil continues to attract investment, the key taxes impacting the sector were lowered.

What is interesting is that the latest figures from the Office for Budget Responsibility (OBR) show that the decline in oil prices and lower inflation don’t yet seem to have had a significant effect on the UK’s economic performance. The Chancellor announced revised growth figures of 2.5% for 2015, up by 0.1% on the figures released in December, with growth of 2.3% predicted for next year. These economic assumptions were largely in line with our and the consensus view.

A stable business climate

This was not a giveaway Budget, and reduction in debt continues over the projection period. The focus remains, as it must, on reducing the Budget deficit towards a position of balance. That demands a tighter policy stance.

What this Budget did highlight – and what businesses can take away from it – is a commitment to create a stable business environment. That will help support business confidence and so encourage economic growth through higher employment and investment spending.

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