UK budget: less spending, more taxing
Chancellor Philip Hammond will present the budget on Wednesday, the UK’s first since it voted to leave the EU in June.
Coming just weeks before the government is expected to trigger Article 50 and begin Brexit negotiations, the budget will seek to provide a pre-emptive cushion for the single-market exit.
Currency depreciation will boost export competitiveness in the short-term and could somewhat reduce the UK’s long-running trade deficit. However, in the medium-term this benefit is expected to be largely negated by increased consumer spending on imported goods.
Ominous predictions of stagflation (low growth and high inflation) have prompted the May government to vigorously pursue new free trade agreements, but this may be an overly optimistic strategy. Trump’s aggressive economic nationalism means he is likely to demand deeper market access to rebalance his country’s long-running deficit in goods trade with the UK.
Mr Hammond is expected to announce measures to drum up funds domestically, hiking duties on alcohol and taxes on the self-employed. He also plans to dramatically reduce government borrowing by $12 billion. Brexit is starting to bite.