Market Loop - Spring statement in a nutshell

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24th March 2022

Bite-sized business news from the UK and beyond

Good morning Yesterday marked the two year anniversary of the first UK lockdown with events across the country to remember the 164k people who have died with Covid.
One of the many things the last two years has shown us is just how quickly life can change and how important it is to cope and thrive when life throws you an unexpected curveball.

Today's stories

Spring statement in a nutshell
UK economic outlook gets bleaker

ECONOMY
Spring statement in a nutshell

What’s going on?
Yesterday the chancellor Rishi Sunak set out his plans for taxation and government spending in the Spring Statement with an additional £18bn to support living standards promised for the next 12 months.

Why is this important?

The Spring Statement is traditionally a light touch speech about the economic outlook with few new tax or spending policies compared to the full budget in October.

But against a backdrop of surging inflation – now at 6.2%, rising energy prices and a war in Ukraine, the pressure was on for the chancellor to deliver policies to help households through the cost of living squeeze.

Key announcements from yesterday include:

A cut to fuel duty of 5p a litre until March next year.
The reduction of VAT on energy saving devices, such as solar panels, to zero.
Another £500m for the household support fund, which allows councils to help poorer families.
A £3,000 increase to the national insurance threshold, taking it to £12,570 from July 2022 – a £6bn tax cut to compensate 70% of workers for the 1.25% NI increase coming next month.
A promise to cut tax rates on business investment in the October budget.
And a cut to the basic rate of income tax from 20% to 19% by 2024, a £5bn tax cut.

Zooming out

The measures announced yesterday mainly focused on taxation but the gaping hole is what happens to universal credit and public sector pay when inflation is rising so quickly. Without a matching increase in these areas, living standards for millions will come under even more pressure.

Other stories to keep you in the loop

Tax calculator: How the 2022 Spring Statement will affect your wages
Student pain: Student loan changes generate extra £35bn for government
Going up: UK inflation accelerates to 30-year high of 6.2%
Covid-19: UK Covid cases breach 100,000 again as daily figure rises 12% in a week
Brit phone: First UK smartphone in six years to launch going head-to-head with Apple
More exits: Nestlé stops production and sales of non-essential goods in Russia
P&O fallout: Doubt over PM claim that P&O sackings may be illegal
Unlucky: Camelot fined more than £3m over series of National Lottery errors
Back in business: Chelsea allowed to sell tickets again after government tweaks restrictions
Car trouble: War in Ukraine could hit car industry, warns showroom operator Pendragon

ECONOMY
UK economic outlook gets bleaker

British households are facing their steepest drop in living standards on record driven by surging inflation, that’s according to the latest report from the Office for Budget Responsibility.

The OBR gives independent analysis of the UK's public finances and economy, unemployment and inflation forecasts are used by the government to assess how much cash will be available to spend.

At the start of this year the UK economy was still recovering from the pandemic and tackling the emergence of rising prices. The Russian invasion of Ukraine has thrown a huge cloud of uncertainty over the global economy and sent energy prices even higher.

As a result, the OBR has cut its forecasts for UK growth from 6.0% to 3.8% this year and from 2.1% to 1.8% in 2023, as higher inflation erodes real incomes and consumption. Inflation is expected to reach 9% this year – the highest for 40 years with wage growth unlikely to match this level.

Together with higher taxes, the fall in spending power will lead to a decline of 2.2% in living standards this year and next - the largest fall since records began in the 1950s.

The unfortunate message for consumers is that heightened inflation is expected to last until 2024 with wage growth lagging this. The cost of living crisis is set to get worse before it gets better with living standards not expected to return to pre-pandemic levels for two years.

Stat of the day

Google processes trillions of searches every year, and still, 15% of those queries have never been seen by Google before

Interesting links from around the web

10 consumer rights you need to know about
Oscars 2022: 18 bitesize facts about this year's nominees
The origins of the Netflix “Skip Intro” button, which is pressed around 136m times per day

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Market Loop - Spring statement in a nutshell

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