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Britain’s Budget Breaks


Image source: Twocoms - Shutterstock, Karen Arnold - publicdomainpictures

What's going on?

The UK government presented its budget for the coming year on Monday – potentially the last before it Brexits the European Union (EU) in March – and there were a couple of eye-catching announcements.

What does this mean?

The big news is that the UK’s actually expecting better economic growth in the next couple of years than in 2018 – which may help increase government spending after years of cuts. The UK predicts that its deficit (i.e. the amount it spends beyond what it earns) will drop below 1.4% next year, down from 10% in 2010. A growing economy adding less debt each year frees up cash for things like healthcare without raising taxes… all subject to a favorable Brexit deal, of course.

Why should I care?

For markets: Pound shrugs, tech flinches.

The value of the pound wasn’t too bothered by the budget announcement – it barely moved on Monday, with the terms of Britain’s EU exit likely to be the real driving force behind the currency’s future movements. But there was further woe for global tech companies, with plans to introduce a digital sales tax on goods and services sold online in the UK by larger firms – and shares of Facebook, Amazon, and Google parent Alphabet fell, perhaps pushed lower by the news.

The bigger picture: It’s not so smooth on the continent, either.

German Chancellor Angela Merkel said on Monday that she’d step down as leader of her political party after it was hit with losses in regional elections recently. She’s been Germany’s top dog since 2005, but her departure won’t be immediate – she’s likely to remain as such until 2021. The euro fell in value as the news broke (Germany is Europe’s largest economy and leadership changes may signal uncertainty ahead) but recovered along with rising stocks – maybe because there’s a three-year buffer of stability between now and then.

Originally posted as part of the Finimize daily email.

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