Neil Woodford says Philip Hammond’s first and final Spring Budget was more interesting for its “context than its content”.
He believes the Office for Budget Responsibility, in upgrading its growth forecast from 1.4 per cent to 2 per cent, may be “coming around to our more benign view of the UK’s economic situation”.
In a recent blog, the head of investment at Woodford Investment Management says the £16bn “windfall” – the reduction in borrowing in this financial year versus that which was forecast last November – is a product of an improving economy.
He says: “Although Hammond is proposing extra funding in areas such as education and social care, he isn’t spending all of the improvement – he is putting the majority of it to one side for a rainy day, or for later in the political cycle, whichever comes first.”
More optimistic on the outlook UK economy than many commentators, many of whom he believes became “too bearish” following the Brexit vote, Woodford says the chancellor took out much of the austerity embedded by his predecessor George Osborne and pointed to the £100bn of extra borrowing proposed over the next five years.
Noting the “eye-watering” public debt, Woodford adds: “There are challenges ahead economically – not least, the public debt burden which, despite recent improvements, remains ‘eye-watering’ – but the UK economy is relatively well-placed to deal with them and we would expect the debt burden to start to diminish more quickly than the Chancellor has forecast, over the next five years.”
He concludes: “We are more positive on the outlook for the UK and, naturally, more positive about the outlook for some domestic stocks.”