The UK government has recently announced an ambitious blueprint of trade, industry, and infrastructure that should be in place by June. At the heart of these plans is an obvious emphasis on “Bob the Builder” projects, an unmistakable intention to increase infrastructure spending. The new initiatives face a huge challenge through potential US tariffs and overall economic uncertainty that may derail such plans.
The government's strategy includes utilizing the unconstrained capital budget for buildings, which is exempt from the chancellor's financial rule. Advocating for this budget to go towards public defence-related spending infrastructure investment has never been more crucial. Though there is plenty of good feeling about these plans, the debate this coming fall may focus on whether more taxes are needed.
With every passing year, these challenges deepen. The US could slap 20% tariffs on the UK as early as next week. Tariffs of this scale would have a major impact on the UK’s economic prospects, forcing us to downgrade our growth forecasts. Industry experts have cautioned that these tariffs alone could erode the £9.9 billion headroom. That headroom will provide much-needed leeway for the chancellor to stay within current borrowing rules.
Broader economic uncertainties add to the mix, in particular higher interest rates and lower UK productivity. The downside risks to the economy are extremely elevated. Consequently, everyone is talking about new economic agreements with the US, and a British Brexit reset with the EU in the near future.
In positive legislative news, the Planning and Infrastructure Bill should be passed later this year. This bill would help expedite vital infrastructure projects across the country by limiting the range of judicial reviews, speeding up development timelines.