18 March 1998
Budget could strengthen Sterling, analysts warn
By FWi staff
FARMING leaders and analysts breathed a sigh of relief after yesterdays Budget. But they soon voiced concerns that Sterling could strengthen in the wake of Chancellor Gordon Browns speech.
An expected tax on pesticides and fertilisers failed to materialise. And with major gains to be had from changes to capital gains tax, it seemed like good news all round.
“We were expecting a few nasties for agriculture and none of them seem to be there,” said Francis Mordaunt of consultants Andersons. But then he added: “My main worry is that the Chancellor seems to be putting more money into the economy than hes taking out.”
Such a policy could prove inflationary, analysts warn. The Chancellor himself acknowledged in his Budget speech that inflation will climb to 3% this year.
According to George Dunn, chief executive of the Tenant Farmers Association, “This could increase the pressure on the Bank of England to raise interest rates, which will cause Sterling to strengthen further – leading to more pain for hard-pressed farmers who are already forced to compete on equal terms with their EU neighbours.”
Tony Pardoe, of surveyors Carter Jonas, said that while the Budget was “far better than we hoped for”, it remains to be seen how Sterling reacts.
But Tim Bennet, NFU deputy president, said that “although the strength of the Sterling was acknowledged by the Chancellor, he could do little in the Budget to address the problem.”