Spring Statement: Economy to grow at slowest pace since 2009

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The UK economy will grow at the slowest pace since the financial crisis this year, according to official forecasts.

The Office for Budget Responsibility cut its 2019 growth forecast to 1.2%.

This is down from the 1.6% expansion predicted by the government’s economic watchdog last October.

While this would be the weakest growth since 2009, the OBR also revised down its government borrowing forecasts against a backdrop of rising wages and a healthy jobs market.

The OBR also expects any economic weakness to be temporary.

Presenting an update on the health of the economy, Chancellor Philip Hammond said the decision by MPs to reject Theresa May’s Brexit deal for a second time had left a “a cloud of uncertainty hanging over our economy”.

He used the Spring Statement to warn that leaving the European Union in a disorderly fashion would deal a “significant” blow to economic activity in the short term.

However, Mr Hammond also said the economy had “defied expectations” as wages were expected to keep growing at rates of above 3% over the next five years.

Mr Hammond also stressed that the forecasts by the OBR were based on a smooth Brexit and transition period.

He said a “deal dividend” would free up more money to spend on public services and cut taxes while still meeting self-imposed limits on government borrowing.

Mr Hammond hinted that the government would have an extra £26.6 billion to spend if MPs voted to leave the EU with a deal. This is almost double the £15.4 billion estimated by the OBR in October.

The statement left the forecast for GDP growth in 2020 at 1.4% and now expects the UK economy to expand by 1.6% a year in the following three years.

Borrowing improvement

The government is expected to borrow £22.8 billion this financial year to plug the gap between the money it spends on public services and the tax revenues it collects.

This is almost £3 billion lower than the £25.5bn predicted by the OBR in the October Budget.

The watchdog expects the improvement in the public finances to continue in future years, helped by stronger tax receipts and lower spending on debt interest.

While borrowing is then expected to rise to £29.3bn next year, it is then predicted to fall over the next four years.

The Chancellor announced he was making an additional £100m over the course of the next year to help deal with the surge in knife crime.

The cash is to be used for police overtime and to fund new ‘Violent Crime Reduction Units’ to help respond to the increase.