Chancellor could be forced into budget u-turn: HSBC

By Rick Pendrous

- Last updated on GMT

U-turn ahead? Chancellor George Osborne may reveal a policy u-turn in his budget statement of March 20, accordng to HSBC
U-turn ahead? Chancellor George Osborne may reveal a policy u-turn in his budget statement of March 20, accordng to HSBC
Chancellor George Osborne could spring a huge surprise when he announces his budget on March 20 by raising short-term borrowing to stimulate much needed growth in Britain’s stagnant economy, the head of economics at the HSBC has said.

Giving a keynote address to the Agriculture and Horticulture Development Board’s Outlook 2013 conference earlier this month (February 13), Mark Berrisford-Smith said the time might have come for Osborne to make a u-turn. He could borrow more money to support initiatives to drive growth in the UK economy, which has been “woeful”​ to date.

With a general election just two years away, time was running out for the government to prove to the electorate that the recession was coming to end and that better times lay ahead. As things stand, Berrisford-Smith doubted any significant recovery would emerge until 2017.

‘Is he up for change?’

“Plan A has not worked. The question is, is he​ [Osborne] up for change?”​ asked Berrisford-Smith. “The deficit is still remarkably large. If you strip out all the windfalls​ [such as the sale of the 4G mobile communications network] – it’s still more than 7% of gross domestic product​ [GDP].

“Has the time come to go out and borrow some money in the expectation that, though you might borrow money more in the short-term, in the long-term you might have more growth and we would end up ultimately borrowing less? The Japanese are already going down this route. And that is why the budget of March 20 could be such a humdinger.”​ But Berrisford-Smith also conceded it could also prove to be “boring” ​budget.

Berrisford-Smith’s comments were made before ratings agency Moody’s stripped Britain of its AAA rated debt status for the first time ever, which added to the pressure on Osborne to change direction. A recent survey of retail bosses, which included Tesco, Sainsbury, Morrisons and Marks & Spencer, has also shown that businesses are getting impatient with the government’s poor handling of the economy.

‘Second division of mediocrity’

“We are somewhere down in the European second division of mediocrity,”​ said Berrisford-Smith. While recognising that any change in policy direction would be “a difficult calculation” ​for the chancellor, he noted that the fact that the UK economy was now 3% smaller than before the recession made a change in direction more likely. One of the few positive developments for UK economy was that it had created lots of jobs (500,000 last year alone), said Berrisford-Smith.

Britain’s economy “really hasn’t grown and has been stalled since about the last 18 months”,​ he reported. “It’s very easy to blame it all on Europe. But that is only a small part of the story. The reason this economy is stalled is ultimately down to households.” ​He argued that consumer confidence desperately needed to be restored.

“Households that provide that 60% base-load of GDP​ [Gross Domestic Product] have stopped spending and they have stopped spending for a variety of reasons,” ​he said.

Fear, about house prices, debt and – most important – the failure of wages to keep pace with inflation, were all undermining consumer confidence, he added.

Related topics Services

Related news

Show more

Related products

Carbon Reduction for Large Energy Users

Carbon Reduction for Large Energy Users

Content provided by ESB Energy | 12-Nov-2021 | Product Brochure

ESB Energy Business Solutions can help you meet your companies carbon targets by 2050. We offer a range of sustainable tailored solutions to reduce the...

Related suppliers

Follow us

Featured Jobs

View more


Food Manufacture Podcast

Listen to the Food Manufacture podcast