Economic Review – April 2017

In a surprise move on 18th April, the Prime Minister, Theresa May, announced that she is calling a snap general election: “I have just chaired a meeting of the Cabinet, where we agreed that the Government should call a general election, to be held on June 8.”

Economists were expecting UK GDP growth to slow to around 0.4% in Q1 as consumers reduced their spending in response to rises in inflation. However, in preliminary growth estimates released on 28th April, the Office for National Statistics (ONS) reported a 0.3% growth rate for the UK economy in Q1 2017. This is the slowest growth rate since Q1 2016.

April maintained the bullish sentiment prevalent in global equity markets, as political elements concentrated the mind of investors. Unfortunately, the FTSE100 bucked the trend somewhat, towards the end of the month, having experienced a volatile period mid-month to register a 251 point swing from its high of 7,365.5 to its intra-month low of 7,114.36. It closed the month at 7,203.94, registering a fall of 1.62%. The wider FTSE250 fared better, gaining 3.39% to 19,615.36, with the AIM gaining 3.69% to 963.72.

Following the recent quarterly CBI (Confederation of British Industry) Industrial Trends Survey of 397 UK manufacturers, Rain Newton-Smith, the Chief Economist of the CBI commented: “UK manufacturers are enjoying strong growth in demand from customers in the UK and overseas, and continue to ramp up production.”

The UK’s borrowing declined by £20bn, to reach £52bn in the year ending in March 2017. The independent Office for Budget Responsibility (OBR), which closely monitors the government’s economic forecasts and performance, believed the figure would be slightly lower at £51.7bn. This was therefore the figure offered by the Chancellor of the Exchequer, Philip Hammond, in his last Spring Budget in March. The OBR cautioned at the time, that they believed the deficit would continue to rise as anticipated tax receipts would decline in the following quarters.