The investment industry has provided a mixed reaction to Chancellor Rishi Sunak's Spring Statement, with some commentators welcoming policies focused on the cost of living crisis and tax cuts, and others asking why the UK Government has not promised to do more. 

Cost of living crisis

Vivek Paul, UK chief investment strategist at BlackRock Investment Institute, said the statement sought to balance "the need to be seen to tackle the UK's cost of living crisis with the desire to re-establish economic credibility with the electorate," while seeking optionality to deliver "crowd-pleasing tax cuts, which were explicitly flagged, ahead of a general election within two years."

But the policies announced by Rishi Sunak will not do enough to appease people facing rising living costs, according to Myron Jobson, senior personal finance analyst at interactive investor. He said a 5p per litre reduction in fuel duty could cut the cost of filling an average family car by around £2.75, which is "small change" compared to the recent hikes in the cost of fuel.

Meanwhile, oil companies are "still sitting and happy" following the lack of announcements on a potential windfall tax.

"Investors will be happy - as long as they are not green - as consumers take the pain," he added.

Jobson welcomed the respite for low-income households in the form of an extra £1bn in funding to the Household Support Fund but warned they may have to contend with "large amounts of red tape to get much needed financial support."

Similarly, Ross Duncton, managing director, head of marketing & direct at BMO, pointed towards research showing one in two UK adults are worried about everyday living costs this year, with a fifth cohort unsure of what to do about skyrocketing prices.

He said: "Today's announcement may have eased some of the concerns that a third (29%) of Brits had about fuel prices, and a further one in ten (9%) felt about rising national insurance contributions, but consumer concerns are likely to persist."

With the war in Ukraine continuing to push up the oil price and utility bills due to rise sharply later in the year, inflation is beginning to bite for businesses and households.

Richard Carter, head of fixed interest research at Quilter Cheviot, said inflation in the UK is already at over 6% and will remain at "worryingly high levels for most of the year", while the Office for Budget Responsibility also slashed its GDP forecast for this year from 6% to 3.8%.

He continued: "While the unemployment rate is expected to be unaffected by the slowing of economic growth, it does feel as if we are entering a stagflationary period. It will be difficult for the economy to emerge from this without some additional stimulus, but with interest rates on the rise it is a tricky balancing act for the government and the Bank of England.

"The chancellor still intends to cut taxes as we get closer to the next election and he will be hoping that the improvement in the public finances is not blown off-course by geopolitical events. An uncertain outlook could get even foggier in the months ahead."


Neil Birrell, chief investment officer at Premier Miton Investors, said the chancellor avoided being tagged with the phrase "talking a good game on tax cuts" by moving to increase the threshold on National Insurance and promising that the basic rate of tax will be cut in 2024.

"However, middle earners will still feel the squeeze. The reduction in growth forecasts and inflation predictions are probably not that reliable for this year given the uncertainty abounding, but the direction of both is clear; growth is going lower and inflation is going higher," he said.

Jobson echoed this sentiment, anticipating shouts of ‘is that it?' "to be the overarching sentiment shared by those struggling to stay financially afloat amid the cost-of-living squeeze".

He said: "The bottom line for consumers is strap in for a heightened inflation that is expected to last until 2024 according to official estimates. The cost-of-living crisis is set to get worse before it gets better."


BlackRock's Paul said the room to manoeuvre on policy is "narrower than ever for the Bank and the Treasury" - a consequence of the coordinated fiscal and monetary easing in 2020 that amounted to a "policy revolution". 

He continued: "The bank is in a bind because while it acknowledges that supply-driven inflation is still likely to rise further, it knows overly aggressive tightening could come at too high a cost to growth and employment.  The Treasury, meanwhile, is constrained by debt-to-GDP at multiples of levels in the early 1990s, with surging inflation pushing up borrowing costs.

"We maintain our neutral stance on UK equities - we see the market as fairly valued, rather than cheap, and prefer risk assets in other developed markets, particularly the USA.  In fixed income, UK gilts are a neutral exposure amid a broader DM government bond underweight - we think UK yields will not rise as fast as US equivalents, in part because market expectations for UK tightening seem excessive.  

Callum Stewart, head of DC investment at Hymans Robertson welcomed Sunak's intention to relax DC charge cap rules to "ease the potential for greater levels of investment and innovation in regard to illiquid assets".

Stewart said it was "great news for individual DC pensions scheme members" as this will provide attractive opportunities for them to improve outcomes through their DC pension scheme.

He continued: "The creation of new long-term asset funds will provide DC schemes with access to investments that could improve returns net of costs and charges over the longer term. As the barriers to accessing illiquid investments ease these will help enable the improvement in these member outcomes. Now is the time to explore this exciting development for those with the governance capacity to do so."


Richard Smith, partner at Sandstone law questioned: "Does Sunak's Spring Statement help to combat climate change?"

With the contentious issue of the windfall tax on North Sea oil and gas companies seemingly addressed by the Chancellor, Smith draws a parallel with the anticipated new energy strategy statement, due imminently, which will include renewed drilling for fossil fuels in the North Sea and more nuclear power stations. 

"Are we in 1985?" he said. 

He added the installation of solar panels, air and ground source heat pumps no longer being subject to VAT is "a wink at trying to boost green energy in homes". 

"The chancellor's claim that families who have solar panels installed could see tax savings worth £1,000 is a bit steep given that the average cost is less than £10,000 so the 5% reduction is at most worth £500, and you still need to have the £10,000 spare cash in the first place.

"The government's commitment to backing its COP26 climate change promises through legislative and economic measures seems to be waning already," he said.