Storm clouds are gathering – but Osborne hasn’t fixed the roof
Uncertainty caused by a potential Brexit in the run up to June's crunch vote may be creating a smokescreen as far as the UK economy is concerned: the reality could be far worse than a few pre-referendum jitters.
Recent economic data and surveys reveal some worrying signs about the economy's underlying performance.
Profits at the UK’s largest companies slumped to their lowest level in a decade in 2015 according to a recent analysis by Share Centre, with turmoil in the banking and commodities industries hitting corporate performance.
Read more: Brexit could cut sterling by 15pc, says Treasury
Companies' confidence in the country's economy is at its lowest ebb since 2012, it emerged yesterday, with just 12 per cent of FTSE 350 firms expecting an improvement over the next 12 months. The looming referendum was not even a factor in the general gloom.
The high street is faring no better. Footfall at high street stores dropped by 4.7 per cent in April compared to the year before, according to the British Retail Consortium – the sharpest fall in more than two years.
Meanwhile, the UK's giant services sector grew at its slowest pace in three years in April.
Today the spotlight will fall on the public finances, long in deficit and therefore a thorn in the side of chancellor George Osborne who predicted the UK would be in surplus by now. Economists are forecasting only modest improvement to public sector net borrowing at the start to fiscal year 2016-17, at an estimated £7.3bn in April compared with £7.7bn the year before. Austerity gains were most likely offset by weakened growth hitting tax receipts.
Read more: FTSE firms depressed about the economy – but not bothered about Brexit
Later this week GDP growth, the daddy among economic indicators, is expected to be confirmed at 0.4 per cent quarter-on-quarter in the first three months of the year, compared with 0.6 per cent the previous quarter.
The more the economy slows, the more challenging Osborne's fiscal target of £55.5bn for 2016/17 will become.
Once the referendum has past, Osborne won't be able to hide behind it anymore. And should the UK vote to leave the EU in June’s referendum, the chancellor’s fiscal targets and plans will almost certainly be torn up. With it he can also bin his chances of becoming Prime Minister.