Sterling was naturally more volatile around Chancellor Hammond’s first Autumn statement, but soon settled in the immediate aftermath. After all, many of his revelations were already fairly well documented in the press.
In his Autumn statement, Chancellor Hammond said growth predictions had been cut as a result of the Brexit vote. The Office for Budget Responsibility (OBR) stated that the outcome of referendum meant potential growth over the course of the current Parliament would be 2.4% lower than forecast in March. The OBR growth forecast was upgraded to 2.1% in 2016 – from 2.0% – but then downgraded by 0.8% to 1.4% in 2017. They went on to suggest that Government finances are forecast to be £122bn worse off than in the spring making any chance of “balancing the books” by 2020 impossible.
At a glance the key the key points were that debt will rise from 84.2% of Gross Domestic Product(GDP) last year to 87.3% this year, and will continue higher – peaking at 90.2% in 2017/18. In large this will be to help fund new infrastructure and housing projects. These include a £2.3bn housing infrastructure fund to help provide 100,000 new homes, and a massive £23bn to be spent on innovation and infrastructure over five years. In addition, Mr. Hammond raised the National Living Wage from £7.20 an hour to £7.50, from April 2017.
Overall, the market liked the tone and rhetoric delivered by Mr. Hammond and sterling pushed higher once it had been deciphered. For release today are the BBA mortgage approvals.