People in Britain are still expected to face the biggest fall in living standards on record despite the UK economy avoiding a recession, the fiscal watchdog has said.
The economy will shrink by less than expected and inflation will fall more sharply than previously forecast, in an improved economic outlook in the near term, the Office for Budget Responsibility (OBR) projected.
The position of the Treasury has improved since the last budget statement in November due to declining wholesale energy prices and cooling global inflation.
Previously, the OBR said the UK was due to enter a recession last year and shrink by 1.4 per cent in 2023.
However, the latest projections show the economy is set to avoid a technical recession — two consecutive quarters of decline — and shrink by 0.2 per cent this year as a whole.
It is then due to grow by 1.8 per cent next year, 2.5 per cent in 2025 and 2.1 per cent in 2026 as growth cools.
But the longer-term GDP forecasts are weaker than the OBR had indicated, previously guiding towards economic growth of 2.6 per cent in 2025 and 2.7 per cent in 2026.
The OBR on Wednesday added that the UK remained on course for the sharpest drop in living standards on record over the two years to the end of next March.
The forecaster said the drop would be lower than previously expected but that real households’ disposable income per person would still tumble 5.7 per cent.
Households will therefore feel the pinch more than at any point since 1957, the OBR said.
The spring budget 2023 - in pictures
On Wednesday, the forecasts also showed a sharper drop in inflation this year than previously predicted by both the OBR and the Bank of England.
Inflation is expected to decline by 6.1 per cent this year as a whole, in a revision from previously predicted 7.4 per cent.
It comes after inflation peaked at 11.1 per cent in October as households were hammered by rocketing energy prices and more expensive food.
Inflation is now expected to drop to a lowest point of 0.1 per cent in 2025 before rising again.
“Today the Office for Budget Responsibility forecast that because of changing international factors and the measures I take, the UK will not now enter a technical recession this year," Chancellor Jeremy Hunt told Parliament on Wednesday.
“They forecast we will meet the Prime Minister’s priorities to halve inflation, reduce debt and get the economy growing.”
The Treasury’s finances are also in a better position than previously expected, according to the forecasts, due to higher tax receipts and energy price improvements.
It means that public sector borrowing is on track to hit £152.4 billion ($184 billion) for 2022/23, almost £25 billion less than earlier forecasts.
New measures in the budget, such as increased childcare commitments for working parents, will increase spending, but borrowing is still due to be, on average, £10 billion lower each year from next year onwards.
Nevertheless, the official forecaster also showed that Mr Hunt had given himself much less headroom to meet his fiscal rules than any of his predecessors.
The OBR said the budget measures announced mean that the Chancellor had a buffer of only £6.5 billion to meet his key target of having debt falling as a proportion of the size of economy in five years’ time.
It added that this buffer would reduce to £2.8 billion if fuel duty — which is due to rise by RPI inflation in the projections — is frozen by the government, as it has been in recent years.
Changes to yields on gilts, government bonds, which have fluctuated significantly in recent weeks amid volatility in the financial markets, could also affect this buffer as borrowing costs change.
“The rule is met by a thin margin with the fuel duty indexation, and wafer-thin margin without," said Andy King, member of the Budget Responsibility Committee.
if you go
The flights
Flydubai offers three daily direct flights to Sarajevo and, from June, a daily flight from Thessaloniki from Dubai. A return flight costs from Dhs1,905 including taxes.
The trip
The Travel Scientists are the organisers of the Balkan Ride and several other rallies around the world. The 2018 running of this particular adventure will take place from August 3-11, once again starting in Sarajevo and ending a week later in Thessaloniki. If you’re driving your own vehicle, then entry start from €880 (Dhs 3,900) per person including all accommodation along the route. Contact the Travel Scientists if you wish to hire one of their vehicles.
Ziina users can donate to relief efforts in Beirut
Ziina users will be able to use the app to help relief efforts in Beirut, which has been left reeling after an August blast caused an estimated $15 billion in damage and left thousands homeless. Ziina has partnered with the United Nations High Commissioner for Refugees to raise money for the Lebanese capital, co-founder Faisal Toukan says. “As of October 1, the UNHCR has the first certified badge on Ziina and is automatically part of user's top friends' list during this campaign. Users can now donate any amount to the Beirut relief with two clicks. The money raised will go towards rebuilding houses for the families that were impacted by the explosion.”
Our legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
START-UPS%20IN%20BATCH%204%20OF%20SANABIL%20500'S%20ACCELERATOR%20PROGRAMME
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New UK refugee system
- A new “core protection” for refugees moving from permanent to a more basic, temporary protection
- Shortened leave to remain - refugees will receive 30 months instead of five years
- A longer path to settlement with no indefinite settled status until a refugee has spent 20 years in Britain
- To encourage refugees to integrate the government will encourage them to out of the core protection route wherever possible.
- Under core protection there will be no automatic right to family reunion
- Refugees will have a reduced right to public funds
Who was Alfred Nobel?
The Nobel Prize was created by wealthy Swedish chemist and entrepreneur Alfred Nobel.
- In his will he dictated that the bulk of his estate should be used to fund "prizes to those who, during the preceding year, have conferred the greatest benefit to humankind".
- Nobel is best known as the inventor of dynamite, but also wrote poetry and drama and could speak Russian, French, English and German by the age of 17. The five original prize categories reflect the interests closest to his heart.
- Nobel died in 1896 but it took until 1901, following a legal battle over his will, before the first prizes were awarded.
The%20specs
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Results:
6.30pm: Handicap | US$135,000 (Dirt) | 1,400 metres
Winner: Rodaini, Connor Beasley (jockey), Ahmad bin Harmash (trainer)
7.05pm: Handicap | $135,000 (Turf) | 1,200m
Winner: Ekhtiyaar, Jim Crowley, Doug Watson
7.40pm: Dubai Millennium Stakes | Group 3 | $200,000 (T) | 2,000m
Winner: Spotify, James Doyle, Charlie Appleby
8.15pm: UAE Oakes | Group 3 | $250,000 (D) | 1,900m
Winner: Divine Image, William Buick, Charlie Appleby
8.50pm: Zabeel Mile | Group 2 | $250,000 (T) | 1,600m
Winner: Mythical Image, William Buick, Charlie Appleby
9.20pm: Handicap | $135,000 (T) | 1,600m
Winner: Major Partnership, Kevin Stott, Saeed bin Suroor
if you go
The flights
Emirates flies to Delhi with fares starting from around Dh760 return, while Etihad fares cost about Dh783 return. From Delhi, there are connecting flights to Lucknow.
Where to stay
It is advisable to stay in Lucknow and make a day trip to Kannauj. A stay at the Lebua Lucknow hotel, a traditional Lucknowi mansion, is recommended. Prices start from Dh300 per night (excluding taxes).
More Iraq election coverage:
Our legal columnist
Name: Yousef Al Bahar
Advocate at Al Bahar & Associate Advocates and Legal Consultants, established in 1994
Education: Mr Al Bahar was born in 1979 and graduated in 2008 from the Judicial Institute. He took after his father, who was one of the first Emirati lawyers
Jawan
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The specs: 2017 Ford F-150 Raptor
Price, base / as tested Dh220,000 / Dh320,000
Engine 3.5L V6
Transmission 10-speed automatic
Power 421hp @ 6,000rpm
Torque 678Nm @ 3,750rpm
Fuel economy, combined 14.1L / 100km
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
