PA Consulting comments on the Autumn Statement

Jonathan Gillham, chief economist at PA Consulting says:

“A challenging picture for 2023 is emerging from the OBR’s forecast, and caution is needed in terms of its interpretation. Both the OBR and Bank of England have full independence in preparing their forecasts. This transparency is critical but the broad range of downside risks presented by both institutions combined with weak consumer and business confidence may mean future forecasts are further downgraded.

“The OBR’s judgement that the Government’s supply side reforms are having a close to zero impact on the economy is of note particularly given the importance of upskilling and public and private investment for economic growth. This makes Government interventions around levelling up and infrastructure investment all the more critical. Given the constraints on public spending, sustaining the £20bn per annum cash increase for Government R&D spending is very welcome. However, coupled with a significant projected decline in business investment, an uplift in the UK’s trend growth rate feels optimistic at this stage.

“The rising dependency ratio presents a key issue, older workers are exiting the labour market (in many cases due to ill health). This means that the UK will have to get used to operating with a higher tax burden for many years to come unless there is a sudden influx into the UK’s workforce.”