Autumn statement - Jersey expert gives his opinion

Thursday 24 November 2016

Kevin Boscher, Chief Investment Officer at Brooks Macdonald, gives his verdict on the Chancellor's Autumn statement and what it means for the UK - and the Channel Islands.

Mr Boscher says the statement is designed to halt Britain sliding into recession and retain the UK's position as a major economic player in global politics.

He said: “The Chancellor’s first and final Autumn Statement set a cautiously-optimistic tone, emphasising that “Britain remains open for business.” In a speech that sought to boost confidence in the UK’s economic prospects, he announced a sizeable increase in the Government’s short-term spending plans and created room to provide further fiscal stimulus if required, but was also keen to state that he continues to consider longer-term fiscal discipline of paramount importance. In our view, the announcements are characteristic of the shift toward populist politics that has been proliferating across the developed world in recent years.

“In the short term, political gridlock is likely to keep the impact of Brexit on domestic UK growth limited, but falling corporate investment is expected to emerge as a significant headwind in the medium term. Likewise, Brexit-related uncertainty and sterling’s decline are both likely to impact consumption. Increased fiscal spending will partly mitigate these headwinds, but it will not be sufficient to stop the economy slowing. 

“In terms of the immediate market reaction, sterling has begun to fall alongside UK equity markets as gilt yields have increased. However, we expect Brexit-related news to remain the primary driver of both sterling and UK equity markets in the medium term. Certain overseas developments, including President-elect Trump’s likely policies, European political developments, China’s growth and OPEC cartel policy, will also continue to be significant drivers. Although the announcements will have a positive impact on UK growth expectations, they have primarily been designed to prevent the UK from falling into (too deep a) recession.”