Economic and fiscal update
The economic backdrop to this year's Budget is more important than ever. It serves as a reminder to us all of the importance of prudent planning and strategy, particularly when it comes to tax and business issues.
The UK economy is far from out of the woods; in fact, GDP was at -0.2 in the last quarter of 2011, and two quarters of negative growth will make the rumours of a double dip recession a harsh reality. But the latest economic and fiscal update from the Office for Budget Responsibility (OBR) suggests that the UK has managed to pull back from this negative growth, as the GDP forecast for 2012 was increased to 0.8%.
Nevertheless, the Chancellor highlighted the 'major risks' posed to the UK's economy by the sovereign debt crisis in the European economy, and volatile oil prices. But on a positive note the OBR reported that net borrowing is falling in-line with the Government's targets, and is set to come in at £126 billion this year, £1 billion less than forecast in the Autumn Statement.
Another key economic indicator, inflation, continued its downward trend in February falling to 3.4 per cent, but remains 1.4 per cent above the Bank of England's target of 2 per cent, while the UK's AAA rating from Fitch is on negative watch. This year's fiscally neutral Budget proves that the Chancellor is sticking to his austerity plans; all of which leads to the conclusion that the UK economy still has a long and arduous recovery ahead.
This Budget report is designed to highlight the issues that you may wish to consider. Please contact us if you think that we can help you to prepare and plan as the economy continues its recovery.