Our Economic experts respond to Chancellor of the Exchequer Rishi Sunak’s Comprehensive Spending Review announced in parliament today (Wednesday 25 November).
During his speech the Chancellor shared the OBR’s latest economic forecasts suggesting that the UK economy is set to suffer an 11.3% decline in GDP this year, before recovering by 5.5% in 2021 and 6.6% in 2022.
Oliver Kolodseike, UK deputy chief economist said: “There were no real new revelations in today’s spending review, in which Chancellor Rishi Sunak laid out the Government’s spending plans for the next financial year. The spending promises will continue to see the country through these difficult economic times, and will attempt to bolster consumer confidence. The pay increases for some public sector and low paid workers are welcome but we will not know until the March budget announcements what the fall out will be for the man on the street - or private investors. Currently we are sitting in a holding pattern and short-term economic performance depends heavily on localised restrictions. Under current forecasts, the size of the economy will not reach its pre-COVID level until at least the end of 2022.”
Key announcements included:
- £3bn Restart Scheme to channel one million long-term unemployed back into work
- Funding for the construction of 40 new hospitals and the refurbishment and upgrade of 70 more
- Increases in the National Living Wage and National Minimum Wage
- A £100bn infrastructure investment fund, with a UK Investment Infrastructure Bank set to be based in the north of England
- A new levelling up fund of £4bn to be utilised by local authorities again for infrastructure.
Dr Walter Boettcher, Head of Research & Economics at Colliers International added: “The long delayed National Infrastructure Strategy appears to have been launched with the announcement of a new National Infrastructure Bank to be located in the North of England. This should be reassuring for property and infrastructure investors because implementing the Infrastructure Strategy will require highly focused financial expertise to support projects and structure opportunities in a way that will attract and optimise private sector investment. Given limited government resources relative to the scale of the undertaking, private investors will be required to do the heavy lifting. The government’s role will be in seed funding and otherwise enabling projects of scale.”
Speaking about the changes in regulations for local authorities borrowing from the Public Works Loans Board (PWLB) John Knowles, Head of National Capital Markets, said: “Changes to the PWLB borrowing is a positive move for local authorities looking to undertake regeneration projects in their area, this will help to make these plans more achievable and affordable and bring about greater town centre investment across the country. The change in emphasis for these loans from investment to infrastructure improvements fairly reflects the challenges faced by local communities and the real estate market currently.
“There are still other alternatives for councils looking to maximise their income on property investments, albeit not with treasury underwriting.”