DFK UK & Ireland

UK Budget Report 2010

This Budget will be welcomed by almost no-one. The Chancellor avoided a large pre-election bribe to the voters – but may not have done enough to satisfy either the financial markets, or the public.

The level of borrowing currently outstanding and proposed for the future is staggering – already 54% of GDP and forecast to rise as high as 75% in three years. This is even more extraordinary when compared to the litany of complaints about the under-funding of public services.

The immediate market reaction to the announcements was supportive but a large element of support derives from the clear public commitment to halving the deficit in four years. Although some simple arithmetic in support of this pledge was produced, the largest single element is a major spending review – work on which will not start until after the election. There is considerable scope for financial markets to take a much more cynical view than they have so far.

Much will depend on the economy’s financial performance over the next few months. Leading indicators suggest the trough of the recession is past and the Chancellor believes we shall see growth this year, albeit modest. Were these factors to reverse, albeit slightly, the second dip of the recession would be much more painful as the spending strategy so far adopted would not be sustainable.

For a summary of Budget Report 2010 supplied by Chantrey Vellacott DFK, please click here.

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