Sterling and gilts were largely unmoved after an Autumn Budget pitched to avoid disruption. Fiscal headroom was partially rebuilt to £15bn, which may temper near-term concerns in the bond market, though the buffer is only about 0.5% of GDP. Measures were limited and targeted, including a higher tax burden on banks to fund modest household energy support, with little to alter the trajectory for growth or inflation.
Growth Forecasts and Fiscal Policy Outlook
The Office for Budget Responsibility cut its 2027 growth forecast to 1.0% from 1.6%, citing the energy crisis, while the government reiterated plans to narrow the budget deficit over coming years. That consolidation is expected to rely more on fiscal drag than on spending restraint, and the Budget offered no concrete plan to curb rising public expenditure beyond a future commitment. With welfare reform delayed, no clear funding route for higher defence spending and a slender buffer, the pound could be vulnerable if growth undershoots or energy prices remain elevated ahead of the Bank of England meeting on Thursday.
