Budget preview: Show me the money

Wednesday 8 March 2017 will go down in economic history, but not for anything particular Philip Hammond might say. No, this will be the last spring Budget following the chancellor's decision to issue a more modest statement in March and shift main business to the autumn.

It makes sense. The UK fiscal year runs from April to March, so a budget in the autumn will give governments more time to implement changes in time for the next fiscal year. In the spring, all we'll get is a response to the Office for Budget Responsibility's (OBR) forecast updates, and how well politicians have been in hitting fiscal targets.

Buzz word this March Budget seems to be "wiggle", or "wriggle" room, take your pick. This Budget will, we're told, "pass smoothly", given this government will have enough on its plate in terms of reform, what with Article 50 and two years of Brexit negotiations.

Azad Zangana, senior European economist and strategist at Schroders, is a "wriggle[r]", suggesting that Hammond may have as much as £12 billion to play with at this Budget.

In the fiscal year April to January, the budget deficit had fallen to £49.3 billion from £62.9 billion during the same period in 2015/16 – spending down, tax receipts up.

"The OBR's growth forecast for 2017 now looks too pessimistic, and so an upward revision could also yield another couple of billion compared to the previous forecast," adds Zangana.

Peer, Fabrice Montagne at Barclays, a "wiggle" man, believes focus will be on the OBR macro forecasts given Prime Minister Theresa May seems determined to force through a hard Brexit. Expect more optimistic growth estimates for 2017, but a downward revision from 2019, warns Montagne.

"All in all, we do not expect anything material given Chancellor Hammond has already said he is adverse to needlessly use any potential headroom given the uncertainty that Brexit poses for public finances in the coming years," he adds.

Even if the remaining two months of the fiscal year - February and March - remain on a par with last year, Hammond will beat targets by £10.2 billion, says Montagne, adding:

"Given the aforementioned risks posed by Brexit – that the government will likely take in fewer receipts than it forecasts and expenditures will likely be higher – we don't see the government achieving its fiscal targets during the process of the UK's 'divorce' from Europe.

Look for a marginal increase in the income tax threshold and National Living Wage toward targets of £12,500 and over £9 an hour, respectively, by the end of this parliament. That's never good news for the retailers most affected by these wage increases. Might the top rate of income tax also be lowered from 45% to 40%? Unlikely.

There'll be some mention of business rates - a hot topic right now and a major issue for retailers and other high street stalwarts like Costa Coffee owner Whitbread and pub chain JD Wetherspoon - although the government is in listening-only mode currently.

Many would also like to see something for the social care sector, and there is talk of a £1 billion lifeline. However, reports also suggest local councils may have to wait until the autumn for any relief here.

In terms of investments, we're likely to get a launch date for the new National Savings & Investments bond, which Hammond flagged up last autumn.We will also get more detail on a £500 million injection of cash into the country's tech industry, used to bankroll development of projects like electric vehicles, robotics and artificial intelligence.

And there'll be money for 5G internet connectivity, as the government has already promised to flesh out its 5G strategy this week. Expect hundreds of millions for businesses and universities, too.

Among the listed companies sweating ahead of the Budget are bookmakers, a whipping boy in recent years and always vulnerable to a further clampdown, especially on fixed-odds betting terminals. William Hill, Paddy Power Betfair and Ladbrokes Coral will be nervous.

Insurers, already reeling after Justice Secretary Liz Truss slashed the discount rate used to calculate lump-sum personal injury compensation, might get it in the neck again. Direct Line and others won't like to hear Hammond mention Insurance Premium Tax.

On a more positive note, the UK's infrastructure firms will hope for another fillip from the chancellor. I'll be talking to motorway gantries maker Hill & Smith tomorrow ahead of the results to see what he thinks Hammond has up his sleeve.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.