Good morning,

UK Politics: quantity over quality

Today’s newsflow is particularly UK-centric. With Phillip Hammond’s inaugural Spring Budget and the House of Lords coming out swinging, it’d be easy to think that the pound’s set for a day of volatility, unpredictable trade and sharp price movements – but this is highly unlikely. By this time tomorrow, the UK will still be on the cusp of triggering Article 50, and the Conservative government will still be following a path of fiscal prudence and careful tax tweaks to maintain popularity. As such, the pound’s unlikely to recover materially from the seven-week lows printed yesterday, with today’s ADP jobs data at 1315GMT likely to be far more influential on exchange rates.

Budget tweaks unlikely to give the pound a shot in the arm

Today’s budget should confirm that Hammond’s chancellorship will be dull, dreary and predictable – just as he intended. In a time of political ambiguity and uncertainty, the last thing the UK economy needs now is a fickle Treasury pressing either the fiscal accelerator or brake to beat economic conditions into shape. As such, don’t expect any tax cut giveaways or swingeing cuts to public services. Phillip Hammond’s firmly of the belief that a hand on the tiller is plenty for now with an eye on the horizon for stormier (potentially Brexit shaped) waters ahead.

Growth forecasts to receive a post-referendum boost

The Office for Budget Responsibility’s forecasts should be revised higher rather sharply: up to something closer to 2.0% growth from autumn’s forecasts of 1.4%, taking into account the better economic data we’ve seen since the turn of the year. This, alongside higher than expected tax revenues, should allow Hammond to further build up his £27 billion warchest with which to combat any forthcoming Article 50-related downturn.

One iceberg the chancellor will be hoping to avoid is the current furore over business rates: the tax burden on small, bricks and mortar businesses is on the cusp of rising sharply as property prices are revalued. These changes will particularly impact those in London and the Southeast, a particular sensitivity given Hammond’s seat is held in Surrey. The Chancellor’s likely to indicate those businesses who are acutely affected will see some sort relief via tax rebates or subsidies later down the line.

May takes a knock in the Lords

The government were defeated on another Brexit bill amendment last night. Members of the House of Lords turned out in their largest numbers since 1831 to vote for parliament to have a meaningful say on the deal that May returns with from Brussels. While ministers will seek to overturn these changes in the House of Commons, it’ll be difficult for MPs to vote to reduce their own influence on the shape of the final Brexit deal.

Have a great day.