Budget 2023: UK economy will avoid recession in 2023 and inflation set to plummet, says chancellor

Published

2 years ago

March 16, 2023

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Jeremy Hunt said the British economy is “proving the doubters wrong” and will avoid recession, as he delivered his first full budget speech to Parliament.

The chancellor said the government’s plan for the economy was “working” as he announced what he called a “budget for growth”.

He said forecasts from the Office for Budget Responsibility (OBR) showed the UK would avoid recession – two-quarters of negative growth – in 2023, despite previous predictions.

But the economy will still contract overall this year by 0.2%, and the OBR has warned living standards are still expected to fall by the largest amount since records began.

More on Budget 2023:
Politics live: The budget as it happened and reaction
The key points of the budget at a glance

The forecaster said the drop would be lower than previously expected but that real households’ disposable income per person would still tumble 5.7% over the two financial years 2022-23 and 2023-24.

Households will therefore feel the pinch more than at any point since 1957, according to the OBR.

Click here for our budget calculator to see if you are better or worse off

The OBR forecasts also said inflation in the UK would fall from 10.7% in the final quarter of last year to 2.9% by the end of 2023.

Mr Hunt said it showed Rishi Sunak’s goal of halving inflation this year would be met, but he added: “We remain vigilant and will not hesitate to take whatever steps are necessary for economic stability”.

However, Labour leader Sir Keir Starmer said the chancellor’s “boasts” about lower inflation were “ridiculous”, adding: “The idea that it’s a tax cut, British people can see through that.

“They see their tax burden at its highest level for 70 years and they know it’s not the government that’s lowering inflation.

“It’s working people, earning less, enjoying less. It’s their sacrifice that is helping to bring inflation down and they deserve better than another cheap trick from the government of gimmicks, making them pay whilst trying to claim the credit.”

A number of other plans were unveiled by Mr Hunt, including:

• Bringing charges for prepayment meters in line with direct debit charges, impacting over four million households and saving them an average of £45 per year

• Making duty on draught products in pubs up to 11p lower than supermarkets

• Maintaining the freeze in fuel duty

The chancellor also said £11bn will be added to the defence budget over the next five years – following an announcement earlier this week – saying it would be nearly 2.25% of GDP by 2025. The government’s ambition is for it to reach 2.5%, he added.

And after reports he would increase the pensions lifetime allowance to £1.8m in an attempt to encourage doctors and other high earners back to work, Mr Hunt decided to scrap the limit entirely, as well as increasing the pensions annual tax-free allowance from £40,000 to £60,000.

He told the Commons: “In the face of enormous challenges I report today on a British economy which is proving the doubters wrong.

“In the autumn we took difficult decisions to deliver stability and sound money. Since mid-October, 10-year gilt rates have fallen, debt servicing costs are down, mortgage rates are lower and inflation has peaked.

“The International Monetary Fund says our approach means the UK economy is on the right track.”

But Sir Keir said the only permanent tax cut in the budget was for “the richest 1%”, adding: “How can that possibly be a priority for this government?”

The Labour leader continued: “Again we see a failure to grip the long-term challenges. No determination to create growth that unlocks the potential of the many – working people being made to pay for Tory choices and Tory mistakes.”

Some policies were revealed ahead of the chancellor’s speech, including keeping the cap on energy prices at £2,500 for a further three months, despite a planned rise to £3,000 in April, and 12 new investment zones.

Sky News also reported last night his promise to provide 30 hours of childcare a week to parents of one and two-year-olds, and to give a further cash injection to the sector to increase the availability of existing free childcare for three to four-year-olds.

But Mr Hunt went further on this measure, saying the care would be available from September 2024 when a child reaches nine months, as well as promising to increase funding for nurseries and pay those on Universal Credit upfront for the childcare they need to get.

However, he also confirmed the ratio for how many children each staff member looks after can be raised from one per four to one per five – though he said it was optional for both providers and parents.

There were more announcements to fit with Mr Hunt’s “three E’s” philosophy – enterprise, employment and education.

They included:

• Incentive payments of up to £1,200 for childminders who sign up to the profession

• Enhanced credit for small and medium businesses, and creative firms

• An extension to relief for theatres, orchestras and museums

• Tax relief on energy efficient measures in firms

• £900m investment into supercomputing

The chancellor also confirmed widely reported plans to abolish the Work Capability Assessment for disabled people to “separate benefit entitlement from an individual’s ability to work”.

Mr Hunt promised a new programme called Universal Support, describing it as “a new, voluntary employment scheme for disabled people where the government will spend up to £4,000 per person to help them find appropriate jobs and put in place the support they need”.

And he said there would be a £400m fund to help those who are forced to leave work because of a health condition to get support in the workplace.

Mr Hunt confirmed he would keep the incoming rise in corporation tax – from 19% to 25% – despite anger from some of his own backbenchers.

But in a bid to keep businesses happy, he introduced a new benefit where every pound a company invests in equipment can be deducted in full and immediately from taxable profits – “a corporation tax cut worth an average of £9bn a year for every year it is in place”.

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In what appeared to echo recent Labour policy, the chancellor announced continued state-financed investment in nuclear power and the launch of Great British Nuclear, saying the public body will “bring down costs and provide opportunities across the nuclear supply chain to help provide up to one quarter of our electricity by 2050”.

And he said nuclear energy would be reclassified as “environmentally sustainable” to give it the same access to investment incentives as renewables.

Today’s statement was Mr Hunt’s first full budget as chancellor – having been brought in by Liz Truss to reverse a number of measures from her disastrous mini-budget last October and kept on by Rishi Sunak after he took over as prime minister.

It came against a backdrop of mass industrial action, with hundreds of thousands of workers today staging what is believed to be the biggest walkout since the current wave of unrest began.

Teachers, university lecturers, civil servants, junior doctors, London Underground drivers and BBC journalists are among those taking to picket lines around the country amid widespread anger over pay, job security, pensions and conditions.

Labour’s shadow chancellor, Rachel Reeves, said ahead of the budget that it was “an opportunity for the government to get us off their path of managed decline”.

She added, if her party were in power, their focus would be on securing the highest growth in the G7.

“Our plan will help us lead the pack again, by creating good jobs and productivity growth across every part of our country, so everyone, not just a few, feel better off,” she added.

Business

Nissan to cut 20,000 jobs globally, reports say

Published

17 hours ago

May 12, 2025

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Nissan is set to announce a leap in its cost-cutting plans that will see 20,000 jobs go globally, according to reports in Japan.

The carmaker, which employs around 6,000 workers at its sprawling manufacturing operations in Sunderland, had already let it be known last November that 9,000 roles would be going amid weak sales and rising costs.

But Japanese broadcaster NHK said on Monday it expected that total to more than double.

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Nissan, which was yet to comment on the claim, is due to reveal full year results covering the 12 months to March on Tuesday morning.

They are expected to show a net loss of up to £3.8bn due to a series of writedowns on the value of its operations.

They will be the first results Nissan has declared since the appointment of a new chief executive last month.

Ivan Espinosa issued a “significant” downgrade to Nissan’s outlook just three weeks ago.

If the job cuts report is true, it would amount to a 15% reduction in the company’s worldwide workforce.

It is not known if the Sunderland production facilities form part of any planned job cuts or production reductions, of up to 20%, that were reported.

Nissan has, on several occasions since Brexit, called the plant’s future into question before proceeding with investment plans.

It has invested £2bn in Sunderland since 2023 alone.

The company secured UK government money this year for a new electric powertrain manufacturing facility in Sunderland.

But a senior Nissan executive, Alan Johnson, warned more aid was needed just last month, arguing that the UK was “not a competitive place” to build cars.

Nissan, like rivals, is facing challenges on many fronts.

US trade tariffs of 25% on all car imports has exacerbated pressure on its supply chain and sales.

The latter has been struggling due to weaker-than-anticipated electric car uptake.

But the vast majority of its cars made in the UK will be subject to a tariff of just 10% after the UK-US trade deal agreed last week.

It does not currently send Sunderland-made cars to the United States. Most are for export to Europe and the domestic UK market.

Business

Trump hails ‘total reset’ with China as trade tariffs slashed

Published

20 hours ago

May 12, 2025

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Trump hails 'total reset' with China as trade tariffs slashed

The US and China have agreed to slash trade tariffs on each other, a move Donald Trump has said was part of a “total reset” in relations.

The president said the 90-day truce followed “very friendly” talks between the two sides in Switzerland over the weekend and those discussions would continue..

“China was being hurt very badly. They were closing up factories they were having a lot of unrest and they were very happy to do something with us”, he told reporters at the White House.

The breakthrough was announced early on Monday – to the delight of fincial markets – by the leader of the US delegation, treasury secretary Scott Bessent.

US trade representative Jamieson Greer confirmed so-called reciprocal tariffs were now at 10% each.

In real terms, it meant the US is reducing its 145% tariff to 30% on Chinese goods. A tariff of 20% had been implemented on China when President Donald Trump took office, over what his administration said was a failure to stop illegal drugs entering the US.

China has agreed to reduce its 125% retaliatory tariffs to 10% on US goods.

Sector-specific tariffs, such as the 25% tax on cars, aluminium and steel, remain in place.

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Tariffs, taxes on imports of more than 100%, had been imposed on both sides. China was the only country exempt from a 90-day pause on the “retaliatory” tariffs above the base 10% levies applied by America.

Major retailers had been warning Mr Trump of empty shelves as US importers pause shipments.

Mr Bessent said after a weekend of negotiations in Switzerland, the countries had a mechanism for continued talks.

It’s the second major trade announcement made by the US in the last week, after a deal was secured with the UK on Thursday.

The move signals a willingness from the Americans to make deals on tariffs.

Why Trump blinked in US-China trade war

Ed Conway

Economics and data editor

@EdConwaySky

Of all the fronts in Donald Trump’s trade war, none was as dramatic and economically threatening as the sky-high tariffs he imposed on China.

There are a couple of reasons: first, because China is and was the single biggest importer of goods into the US and, second, because of the sheer height of the tariffs imposed by the White House in recent months.

In short, tariffs of over 100% were tantamount to a total embargo on goods coming from the United States’ main trading partner.

That would have had enormous economic implications, not just for the US but every other country around the world (these are the world’s biggest and second-biggest economies, after all).

So the truce announced on Monday by treasury secretary Scott Bessent is undoubtedly a very big deal indeed.

Business

Monzo lines up bankers to spearhead blockbuster £6bn float

Published

3 days ago

May 10, 2025

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Monzo, the digital bank which counts one in five British adults among its customers, is closing in on the appointment of investment bankers to spearhead a stock market listing valuing it at more than £6bn.

Sky News has learnt that Monzo is working with Morgan Stanley, the Wall Street giant, on a series of meetings with potential investors ahead of an initial public offering which could take place as early as the first half next year.

People close to the company said this weekend that bankers would be formally hired to work on the listing within months, with Morgan Stanley now expected to be handed a key role on the deal.

The timing, size and location of an IPO are still to be determined and will depend on market conditions in London and New York, both of which have been buffeted by Donald Trump’s introduction of swingeing trade tariffs.

However, London is currently seen as the most likely listing venue for Monzo by board members and investors, according to people close to the situation.

The company, which saw its valuation soar to £4.5bn last year after primary and secondary share sales, is considering a further sale of existing shares to allow early investors and employees to cash in, although a decision to proceed has not yet been taken.

Monzo has more than 11m UK retail customers, making it the seventh-largest British bank by customer numbers, and 600,000 business customers.

Founded a decade ago, it has become one of Britain’s most successful, and valuable, fintech companies.

It employs close to 4,000 people.

Last year, it raised more than £500m by selling newly issued shares to a group of investors led by Capital G, a division of Alphabet-owned Google.

That primary share sale valued the business at £4.1bn.

An IPO, including any new capital raised, would be likely to value Monzo at more than £6bn, and potentially in the region of £7bn, according to banking sources.

Last year’s secondary share sale saw existing Monzo investors StepStone Group and GIC, the Singaporean sovereign wealth fund, buying stock from employees.

The company is now profitable and has diversified into investments and instant access savings accounts.

It has also launched pensions products and accounts aimed at under-16s.

Monzo is among a new generation of banks which have emerged since the last financial crisis and begun to accumulate a significant share of the UK retail banking market.

Rivals include Starling Bank and Revolut, which was valued at $45bn in its last fundraising and was awarded a banking licence by British regulators last year after a protracted process.

Monzo has recovered spectacularly from a difficult period in 2020 when it emerged that the City watchdog was investigating it for potential breaches of anti-money laundering and financial crime rules.

It has revamped its corporate structure as it pursues an international expansion aimed at enticing new investors to its strategy for long-term growth.

The company has been exploring acquisition opportunities in the US and Europe, although a major deal is not thought to be imminent.

Monzo Bank Holding Group was established to avoid the company facing punitive capital treatment by British regulators as it launches in new overseas markets.

Other Monzo investors include the Chinese group Tencent, Passion Capital, Accel, General Catalyst and Hedosophia.

Monzo is run by TS Anil, its chief executive, and chaired by Gary Hoffman, the banker who salvaged Northern Rock after its nationalisation in 2008.

This weekend, a Monzo spokesperson declined to comment.