Brexit and the Budget
by Malcolm McGready
I thought I had missed something so did a word search on the Chancellor’s
Budget speech. However, this confirmed my original observation; he managed to
deliver the entire speech without mentioning Brexit once.
Faced with the uncertainties over the outcome of the Brexit process possibly
the Chancellor thought better of mentioning it and also specifically aligning
particular policies with it.
However, mentioning the OBR’s upgraded GDP growth forecast for 2017 from 1.4%
to 2.0% gave the Chancellor some good news to report. One must of course
remember that in the 2016 Spring Budget GDP growth was forecast to be 2.2% for
2017. Of course, it’s all a question of how things are presented.
Many businesses are dealing with the uncertainty caused by Brexit and from
reading the OBR’s report they are in exactly the same place as us. Their
economic modelling has necessarily had to include assumptions regarding the
impact of Brexit. The OBR make it clear that there is ‘no meaningful basis for
predicting the precise end-point of the negotiations as a basis for our
forecast’. Indeed, they go one to say that even if the outcome were predictable
that both the economic and fiscal implications would be subject to considerable
It is interesting to read the OBR’s view of export growth. Export growth is
seen as a growth area for the UK economy with the current weakness in Sterling.
However, the forecast for export growth has been downgraded in 2017 and 2018 as
a result of weakening global demand, particularly in markets that the UK exports
to. Indeed, one of the OBR’s ‘Brexit assumptions’ is that both export and
import growth will slow over the next 10 years and trading arrangements are put
in place post Brexit.
Against this back drop of uncertainty the Chancellor clearly felt it wise not
to major on Brexit in his speech. He also had little room to manoeuvre with the
current Government policy of deficit reduction and thus a ‘steady as she goes’
Budget was what we got. That said, he might at least have mentioned the decade
defining decision that is Brexit.