UK Autumn Budget: “Invest, invest, invest”

In her 2024 Autumn Budget, Chancellor Reeves revealed significant changes to UK fiscal policy, including a boost in spending, taxes and borrowing, aimed at "fixing the foundations" of the country.

Total spending is expected to rise by approximately £70 billion, with two-thirds allocated to day-to-day expenditures. The tax increases, amounting to approximately £40 billion, will primarily come from a rise in employer National Insurance Contributions and capital gains taxes.

The budget introduced a new fiscal framework with the goal of balancing the current budget deficit by 2029-30, potentially achieving this as early as 2027-28. Additionally, it aims to reduce the debt-to-GDP ratio by 2029-30. An alternate debt measure, compared to the 2024 Spring Budget, has been adopted, allowing for greater borrowing capacity for capital spending.

The front-loaded fiscal loosening is expected to boost GDP in 2025-26 due to increased demand, posing an upside risk to inflation and potentially challenging the Bank of England's rate-cutting cycle. However, fiscal tightening is expected to prevail in the medium-term. In combination with higher gilt yields and a potential boost for growth, this leaves sterling poised for further gains once post-budget volatility abates.