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Autumn Statement: OBR revises down growth forecasts as chancellor abandons surplus target

The Office for Budget Responsibility has revised down its growth forecast for UK GDP.

The OBR now forecasts UK GDP to grow by 1.4 per cent next year, down from its prediction of 2.2 per cent made in March this year.

It forecasts that economic uncertainty around the UK’s negotiations to leave the EU will constrain business investment, while higher inflation caused by sterling depreciation will put downward pressure on growth in household consumption.

GDP is now forecast to grow 1.7 per cent in 2018, down from the 2.4 per cent forecast in the 2015 Autumn Statement, and 2.1 per cent in 2019 and 2020, down from 2.3 per cent.

The OBR forecasts also point to GDP growth of 2 per cent in 2021.

It has also made significant revisions to its outlook for business investment, with a 2.2 per cent fall expected in 2016, followed by a decline of 0.3 per cent in 2017 – a downwards revision of 4.7 percentage points and 6.3 percentage points respectively.

However, growth will return in 2017, with business investment increasing by 4.1 per cent in 2018 and 5.3 per cent in 2019.

The OBR added that business investment would remain lower than its previous forecast.

The chancellor Philip Hammond confirmed that the government would no longer reach its target of a budget surplus by 2019/20, with public sector net borrowing now forecast to be higher than previously expected.

Public sector net borrowing will increase by £11.7bn in 2016/17, compared with March’s Budget; £17.6bn in 2017/18; £20.6bn in 2018/19; £24bn in 2019/20; and £22.1bn in 2020/21.

Overall, borrowing is set to be £68.2bn this year; £59bn next year; £46.5bn in 2018/19; then £21.9bn; £20.7bn, and finally £17.2bn in 2021/22.

This will cause public sector net debt to peak at £90.2bn in 2017/18, after which net debt will fall year-on-year to 2021/22.

Autumn Statement: the impact on the construction industry

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