Statement 2011: What the industry thinks

Chancellor George Osborne delivered his autumn statement today, saying the UK will avoid recession, borrowing may be above initial forecasts, the bank levy will rise and investment will be made in a number of areas of the economy.

Ted Scott, director of UK strategy at F&C Investments, comments: The chancellor is still rigidly sticking to ‘Plan A’ aimed at reducing the UK’s huge fiscal deficit, despite the deteriorating prospects for the economy, which the government’s austerity measures have exacerbated.

“The government will be hoping that the eurozone, as the UK’s largest trading partner, achieves a sustainable resolution to its debt crisis soon so that it will reverse its recent spiral towards seemingly inevitable recession … Without such good fortune, the chancellor may be forced to think hard about a Plan B to forestall a recession of our own.”

Trevor Greetham, portfolio manager of Fidelity’s multi-asset funds, says: “The government argues that straying from its deficit reduction plans even in an emergency would result in a sharp rise in interest rates as we’re seeing in Europe. However, the UK is not in the euro and it can print money to keep its interest rates low.

 “It’s telling that the US has made no effort to cut spending and Japan has more than twice the level of government debt in proportion to its economy but both governments can borrow at even lower rates.”

Ian Sayers, director general of the Association of Investment Companies, says: “The chancellor’s decision to remove the £1m investment limit demonstrates his commitment to reducing red tape in the VCT sector. Making this change will significantly enhance the capacity of the sector to support entrepreneurial businesses.”

Patrick Reeve, managing partner at Albion Ventures, adds: “[With] the seed enterprise investment scheme the Treasury has rewarded the risk of investing in very small start-ups with a substantial tax break.

“By our calculations if you also have capital gains to shelter then an investor has the potential to have a 78% tax break so this will be hugely attractive to private investors.” (article continues below)

Howard Archer, chief UK and European economist at IHS Global Insight, adds: “It does seem that the chancellor is going to accept significant slippage in his fiscal targets as the weakened economy takes a toll, rather than tighten policy further now to try to meet the fiscal targets.

“The government is very aware that more spending cuts and/or tax hikes at this juncture will weigh down additionally on already worryingly limited growth prospects.”

Angela Knight, chief executive of the British Bankers’ Association, comments on the increased bank levy: “The banks are committed to playing their part in restoring the public finances through the many different taxes they pay.

“But a stable tax regime is important: banks of all nationalities do business around the world from here and they pay tax here. Certainty is an important requirement.”

John Cridland, director-general of the Confederation of British Industry, says: “This autumn statement works with the realities of today and provides an imaginative framework for UK businesses as it strives to secure growth and jobs. This is ‘Plan A plus’ in all but name.

“The downgraded forecasts and outlook were no surprise, but the eurozone crisis is still hanging over us. The government’s dogged commitment to budget deficit reduction remains the only way to maintain the UK’s triple A credit rating and low interest rates on international money markets.”

To receive more relevant articles like this one, why not sign up to our briefings and breaking alerts by clicking here.