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Al Etihad
26-03-2025
- Business
- Al Etihad
UK slashes growth forecast, cuts public spending
26 Mar 2025 18:05 LONDON (AFP)Alexandra BACON The UK government halved its 2025 growth forecast on Wednesday as it made billions of pounds of spendings cuts to shore up the public purse in the face of economic Spring Statement spending update came as the Labour government, elected in July after a landslide election win, faces sluggish economic growth and rising borrowing economy is expected to grow by just one percent this year, revised down from an estimate of two percent made in late October when Labour gave its inaugural the Office for Budget Responsiblity, the UK's spending watchdog, upgraded the country's growth forecast for the three following years."Our task is to secure Britain's future in a world that is changing before our eyes," finance minister Rachel Reeves told parliament in the highly-anticipated over US tariffs and the war in Ukraine have added to the UK's economic woes, chipping away the government's fiscal Minister Keir Starmer has recently pledged to hike spending on defence, with the government confirming Wednesday a £2.2 billion ($2.8 billion) boost next avoid slipping into a deficit, Reeves has cut disability welfare payments and government departmental budgets, blaming a period of heightened uncertainty in global markets.- Public spending cuts -Reeves's attempts to mend public finances were constrained by her own fiscal rules and her pledge not to increase rules prevent her from borrowing to fund day-to-day spending and call for debt to fall as a share of the gross domestic product by of Wednesday's update, the centre-left government announced it would slash the cost of running the civil service by 15 percent over the next five years, targeting annual savings of around £2 has unveiled also contested cuts to disability welfare payments, in the hopes of saving billions annually by the end of the Labour has highlighted increased funding for housing, the struggling National Health Service, and reforms to workers' rights, it is spending cuts that have remained in the cuts added to criticism piled on Labour after it scrapped a winter-fuel benefit scheme for millions of pensioners last business tax comes into effect from April, pressuring businesses facing a hike to the minimum wage. In a glimmer of good news, official data showed Wednesday that Britain's annual inflation rate eased to 2.8 percent in February, down from 3.0 percent in January.
BBC News
29-01-2025
- Business
- BBC News
Could Racheal Reeves' new reforms boost growth?
Chancellor Rachel Reeves said on Wednesday that "economic growth is the number one mission of this government" as she unveiled a series of proposals to boost the UK's economy. But how quickly could the government get growth from the plans she announced?Critics have argued some of the projects - such as expanding Heathrow - would not help in the near Verify has examined some of the key numbers and claims. How slow is the UK's growth? The most recent official data shows there was virtually no growth in GDP - the overall size of the UK economy - between the July 2024 election and November 2024. And the latest medium term official growth forecast from the Office for Budget Responsiblity, the government's official forecaster, is for 1.6% GDP growth in 2029, which would be well below the pre-2008 financial crisis average growth of 2.8% a the International Monetary Fund has forecast that the UK's growth rate for 2025 and 2026 will be higher than in France and rates of GDP growth would translate into slower growth in our wages and incomes and general living standards. Heathrow expansion The chancellor said that allowing Heathrow to build a third runway would "create 100,000 jobs", boost investment and exports and "unlock futher growth".She cited a new report by the consultancy Frontier Economics which found it could increase the UK's potential GDP by 2050 by 0.43%, around £ is broadly in line with the findings of an independent commission by Sir Howard Davies in 2015, which concluded a third runway at Heathrow would support UK trade and enhance productivity and push up GDP by 0.65-0.75% by 2050 relative to most analysts believe it would likely take many years before shovels went into the ground to start building a new runway, even with new reforms to speed up the planning the government will have a difficult balancing act to both expand Heathrow and meet its climate Verify asked the Treasury for its source for the 100,000 jobs figure and it pointed to a 2017 report by the Department for Transport estimating that a new runway at Heathrow could add between 57,000 and 114,000 additional local jobs. Though that report added that "these jobs are not additional at the national level, as some jobs may have been displaced from other airports or other sectors." Oxford-Cambridge Growth Corridor The chancellor in her speech claimed an Oxford and Cambridge Growth Corridor "could add up to £78bn to the UK economy by 2035".This corridor is a resurrection of the previous government's plans to join Oxford and Cambridge with new transport links and allow those two university and research hubs to support of the chancellor's figure, the Treasury has cited research by an industry group called the Oxford-Cambridge research shows that this £78bn is a "cumulative figure" over 10 years, not the boost in a given analysis suggests the project could add £25bn in Gross Value Added (GVA) a year to the UK economy by would constitute roughly a permanent 1% boost to UK GDP by that date. Estimates of the impacts of an infrastructure project on growth are inherently uncertain and very sensitive to the assumptions of researchers about what would have happened to growth if it had never been most economists do believe infrastructure projects, especially those that allow already productive places to expand, will ultimately help the UK economy grow more rapidly than Caswell, a senior economist at The National Institute of Economic and Social Research (Niesr), said: "Big infrastructure projects typically deliver growth over the long term, approximately 10 to 20 years." "There may be a small demand side boost in the short term when shovels are in the ground, but nothing so significant that you would see it in headline GDP growth figures."However, after the project is complete, the supply capacity of the economy is permanently enhanced, and, all other things equal, that delivers higher sustained GDP growth than would have otherwise been." Pensions reform Another reform the chancellor says will be pro-growth is enabling UK companies to access the funds from their "defined benefit pension" pots, held on behalf of their workforces to fund their benefit pension schemes guarantee an annual pension payment to retired workers, based on their salary while they were in of these defined benefit pension pots have moved into surplus in recent years due to the rise in interest rates since the pandemic, meaning their financial assets (their investments) are greater than their financial liabilities (what they have to pay out to pensioners).The Treasury has said that approximately 75% of schemes are now in surplus and that the total surplus adds up to £ chancellor wants to legislate to allow the firms to use these funds to invest, while keeping safeguards to protect and guarantee workers' pension shake-up plan aims to boost growthWhat's the plan for a third runway at Heathrow Airport?At a glance: What was in Rachel Reeves's speech?Measuring the size of the surplus of defined benefit scheme depends on various complex assumptions about the scheme and its relationship to the official Pension Regulator estimates that on one measurement the size in September 2024 was £207bn, but £137bn on a different Treasury's estimate is roughly midway between the such sums were deployed that could, in theory, make a positive difference to overall UK business investment, which is regarded by economists as both a short term and a long term driver of GDP business investment in 2023, according to official data, was £ the size of any boost from this pension reform would depend on companies being willing to invest their surpluses, which is subject to great uncertainty as many firms have been looking to offload their defined benefit pension schemes to insurance companies in recent years. 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