Woodford Investment Management has said economic pundits will continue to get UK growth forecasts wrong as the Budget delivers a sunny outlook for the economy following Brexit.
Office for Budget Responsibility (OBR) forecasts released on Budget day forecast UK GDP growth of 1.6%, an improvement on its previous forecast of 1.3% made in the Spring Statement. It also revised growth expectations upwards for future years to 1.4% in 2020/21, 1.5% in 2022 and 1.6% in 2023.
“Tellingly, our famously cautious chancellor said very little about Brexit, focusing instead on the end of austerity while maintaining fiscal prudence,” said head of investment communications Mitchell Fraser-Jones in a monthly update from the boutique UK equities manager.
The Budget did reveal government spending on Brexit preparations would be increased to more than £4bn.
‘An astute Budget’
The OBR is belatedly acknowledging that the UK economy is performing significantly better than it had forecast, Fraser-Jones said.
In April, Woodford said the UK would become the fastest growing economy in the Organisation for Economic Co-operation and Development (OECD) by the end of 2018. The fund house predicts the economy will surprise consensus in 2019, pointing out the International Monetary Fund significantly downgraded its global growth outlook in October while upgrading UK growth.
Fraser-Jones attributed the improved growth forecasts to “more people in work, earning and spending more money” plus the tailwind of real growth in government spending.
“This was an astute political Budget and one which underlined the significant economic improvement that is unfolding here in the UK,” he said.
Elsewhere, he said the extension on Help-to-Buy to March 2023 and the cap on stamp duty for first-time buyers would be helpful for the housing market.
However, he was silent on a feasibility study into incorporating patient capital into defined contribution (DC) pension schemes. Woodford has previously been a champion of unlocking access to capital for the UK’s innovative start-ups and sat on the industry panel of the Patient Capital Review, which was launched in 2016.
