This time next week the Chancellor of the Exchequer will stand before Parliament and deliver the Spring Budget. It seems likely to confirm that the Office for Budget Responsibility’s (OBR) growth projections for the UK remain sluggish at best, improving slightly in 2025 as interest rates continue to fall. The OBR’s forecast back in November showed that real disposable income per household was expected to be 3.5% lower in 2024/25 than its pre-pandemic level and the fact that growth in the UK has been stagnant for so long will continue to weigh on the outlook for households. The question will be whether Mr Hunt can provide a short-term boost through any new tax and benefit changes.
Of interest to investors perhaps, is the continued speculation surrounding the launch of a British ISA. I don’t know whether this alone would be sufficient to revive the fortunes of the UK stock market, but if were to allow the purchase of shares in UK companies to be free from stamp duty – currently charged at 0.5% - then it would likely be a small step in the right direction. The UK population still predominantly saves into cash rather than stocks and shares ISA accounts. Historically, returns from investments such as shares have been better than cash, but they can be volatile, and returns are not guaranteed. Nevertheless, encouraging a little more investment in UK companies could be good for both our stock market and for savers over the longer term. It will be interesting to see what, if anything, is announced.
Away from the UK, I have previously written about how the focus on artificial intelligence is shaping markets and last week Nvidia, the US-listed chipmaker, saw its shares soar by a further 16% following another blockbuster earnings report, adding a staggering US$277bn to the company’s valuation in just a single trading session!
