Budget - March 2016

Wednesday 16th March at 16:30 - £1.00 GBP = 1.2722 EUR

This afternoon, George Osborne outlined his 8th budget as Chancellor of the Exchequer, one that aims to target the ‘next generation’. There are many suggestions that this was Osborne’s most difficult budget to date, as some believe it is also acting as a pre-cursor for his shot at the Conservative party leadership. This has been made even more problematic by the slowdown of the UK economy, combined with the government’s split over Europe. Indeed, Osborne warned against Britain leaving Europe in his speech.

The highlights of his budget included a downwards revision to UK growth forecasts, with 2016 being downgraded to 2.0% from 2.4% and 2017 also being revised down to 2.2% from 2.5%. Starting from 2020, corporation tax will also be cut to 17% and importantly for many UK SMEs, he announced that 600,000 small businesses would be exempt from business rates, saving them up to £6,000 per year.

For individuals, the higher 40% income tax barrier was raised to £45,000 from next year and he announced that ISA allowances would reach £20,000.

Following his speech, the FTSE 100 was impressed, rising to 6171, while the pound was less so. Sterling hit fresh daily lows against both the euro and the US dollar reaching GBP/EUR 1.2676 interbank (IB) and GBP/USD 1.4051 (IB). Sterling clearly was not happy by Osborne revising growth forecasts downwards.

Overall it seems that it his speech had many of the elements of a traditional Conservative budget and that Osborne has adopted a Thatcherite approach by championing small business.

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