The British economy [May 1986]

Since the last quarter of 1985 developments in the UK economy have been dominated by the sharp falls in oil prices. With UK interest rates high by international standards and the weakness of the US dollar there has, however, been no repetition of a sterling crisis on the scale of that in January 1985. The most immediate impact of the lower oil prices was felt in terms of the Chancellor's limited scope for income tax reductions in the March Budget. On balance, the UK will benefit in the medium term as a consequence of the stimulus given by lower oil prices to international trade and the depreciation of sterling against the major European currencies