Chancellor, Philip Hammond, delivered his Autumn Statement last Monday, which he claimed was a business-friendly budget with rates cuts for small retailers and a freeze on duty for beer, cider and spirits. He also increased the personal allowance to £12,500 and the higher tax rate threshold to £50,000; both to take effect from April next year. In a budget where he declared that austerity was coming to an end and in preparation of a ‘no-deal’ Brexit, he said public finances were in the best shape for many years and are forecast to improve, with borrowing in 2018 to be £11.6bn lower than previously forecast. Mr Hammond upgraded UK growth for 2019 to 1.6%, with expectations of 1.4% for the following two years. Additionally, the Chancellor declared a £30bn package to repair England’s roads and an increase in infrastructure spending to enable a further 650,000 homes to be built. He also announced a new digital services tax to come in to effect in 2020 to make global technology firms operating in the UK pay their fair share of tax.
The Bank of England indicated last week that interest rates could rise at a faster pace if the UK manages a smooth exit from the European Union. Although the Bank kept rates unchanged at 0.75%, its latest forecasts suggest they could rise to 1.5% over the next three years. Growth in loans and credit cards slowed to its weakest pace for three years and is now below its 20-year average pace, however total consumer debt still stands at a record £215bn. The Brexit uncertainty and the scaling back of lending by the high street banks are curbing consumer spending, and this has also slowed the housing market with average prices up just 1.6% year on year.
The stock market lost much of its spark in October due to political uncertainty, the continued trade wars and rising interest rates in the US, leading to the strengthening dollar. The S&P 500 Index in the US had its worst monthly performance since 2011, however, October is notoriously a volatile month in the markets and it looks, so far, that this correction could be a repeat of the one witnessed in February. After falling over 8% in value since the beginning of October, the FTSE 100 Index, along with most global indices, recovered some of its lost ground last week as tensions between the US and China abated with Presidents Trump and Xi Jinping looking to reach an agreement.