Judging by the volley of upbeat remarks concluding the chancellor’s first Spring Statement, Phillip Hammond was in something of an upbeat mood. We are, allegedly, a country that works for everyone… a beacon of enterprise and innovation. An outward looking, free-trading nation and one that is confident that our best days lie ahead of us…
Of course, large swathes of disgruntled voters at the last general election appear less convinced.
But while the delivery was upbeat, the content was decidedly thin. The clue’s in the name. It was after all, a statement, not a budget.
That may have been to Mr Hammond’s advantage, given that the chancellor’s moment at the despatch box was largely hijacked by the news that US secretary of state, Rex Tillerson, was being fired, very publicly, at the hand of President Trump’s Twitter app. In the currency markets, the pound strengthened because of the subsequent fall in the US dollar, not because of anything material contained in the statement.
In terms of economic growth, there were some positive, albeit very modest announcements. Economic growth, it appears, is not quite as bad as we have been led to believe. Growth for 2017 came in at 1.7 per cent versus an estimated 1.5 per cent, and forecasts for subsequent years were upgraded. Add to that the fact that employment levels remain robust, debt is coming down as a proportion of GDP, and it is difficult not to come to anything other than the conclusion that growth in UK plc will be ok. Nothing spectacular, but nothing disastrous.
Frustratingly, there was less upbeat news on UK productivity, the subject of so damning a report from the Office for Budget Responsibility just months ago. It shows little signs of improvement, with the country’s productivity conundrum not looking any closer to being resolved any time soon.
But for those beleaguered UK consumers, so key to propelling the growth of the economy forward, there was better news on real wage growth. Courtesy of inflation peaking, the lot of the UK consumer might just become that little bit better over the course of this year.
Unsurprisingly, for those looking to invest in the UK stock market, it takes a large leap of faith to jump to the conclusion that just because real wage growth is improving, UK domestic stocks, such as retailers should be re-rated. But these types of stocks have been under a cloud for some considerable time now. Just as stock market investors know that nothing goes up in a straight line forever, the reverse is also true.
Perhaps what Chancellor Hammond did do was to prepare the ground for things to come. The sums mentioned to help the UK housing market were miniscule but they were mentioned. The reference to help small businesses and entrepreneurs was slight but it was mentioned. The chancellor, together with his prime minister, is all too aware that the UK remains deeply divided - over Brexit, over student loans, over pensions, over the housing market.
Come the autumn, let’s hope the chancellor has listened.
Richard Buxton is head of UK equities at Old Mutual Global Investors.
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