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2026-09-18 20:56:09
[Deutsche Bank: UK Fiscal Space Significantly Narrowed Ahead of Autumn Budget] ⑴ In a report, Deutsche Bank's Raja and Brennan pointed out that Chancellor of the Exchequer Healy's available fiscal flexibility will be significantly reduced before the autumn budget is released. ⑵ They estimate that current fiscal space is only slightly above £8.5 billion, less than half the level reported in the spring fiscal report. ⑶ Space under the secondary debt rule has fallen to £17.2 billion. ⑷ Economists say that higher-than-expected interest rates will increase government debt interest costs by approximately £13 billion by fiscal year 2030-2031. ⑸ Higher inflation due to the energy shock will also increase fiscal financing needs by approximately £2 billion. ⑹ Reduced immigration will compress the working-age population and tax base, potentially pushing up financing needs by another approximately £2 billion. ⑺ From a market sentiment perspective, the thinning fiscal buffer means that UK government bonds and the pound will be more sensitive to any signals of tax increases or spending cuts before the budget is announced. ⑻ The latest forecasts from the Office for Budget Responsibility and the government's trade-offs under the debt rule should be closely monitored. (9) Overall, the combination of multiple pressures has made the autumn budget face a more severe balancing challenge.
