Hoping that something turns up: The Chancellor’s Autumn Statement
Economic commentary from Mark Berrisford-Smith, Head of Economics, Commercial Banking, HSBC UK.
18 November 2022
Key points
Jeremy Hunt’s Autumn Statement brought few surprises, with measures in the short term to support the economy as it weathers a recession, but curbs on public spending from 2025. Many unpopular aspects of the package have therefore been left to the next government.
The OBR anticipates that the government will need to borrow around £300 billion more over five years than it envisaged as recently as March, with the cost of servicing the national debt peaking at £120 billion in the current fiscal year. The ratio of debt to GDP will continue to rise in coming years and isn’t expected to start falling until 2027/28.
The retention of universal energy price support for households until March 2024, albeit at a higher level, will help to keep a lid on inflation during 2023. HSBC expects inflation to fall to 5.2% at the end of 2023, but also anticipates that it will still be above the 2% target a year later. With the Bank of England having assumed in its latest forecasts that universal support would be retained, the stance of the Autumn Statement will have no meaningful impact on the outlook for Bank Rate, which HSBC still expects will peak at 3.75% in February 2023.
The statement appears to have preserved the recent calm in financial markets. Yet the path ahead is daunting, with households set to see the past eight years of improvement in living standards wiped out during the coming recession. The government is no doubt hoping that something will turn up, so that some of the measures in this statement can be reversed at a later date.
To read the full analysis, click here.