The UK’s Autumn budget introduces a slew of fiscal adjustments - a char that reads "GBP bln"

Despite the immediate market-calming effects of the budget announcement, macroeconomic challenges and political risks continue to weigh on the outlook

The long-term effect of the Autumn budget will likely depress domestic consumption, including B2G and B2C demand, while the drop in investments will also weigh on private investments, effectively dampening B2B demand. The budget, however, has calmed financial markets and should provide some more predictability in the medium term. Persisting macroeconomic challenges and ongoing political risks, stemming from the ongoing row with the EU over the NI protocol, will continue to weigh on the outlook, necessitating robust scenario planning.


  • Chancellor Jeremy Hunt unveiled the Autumn Budget on November 17, setting out a long-term fiscal plan to balance public finances and calm markets.
  • Total public expenditures are set to rise by 13.2% YOY, with the current plan envisioning much higher spending of GBP 1,062 billion over the Spring plan of GBP 973 billion.
  • Under current projections, the government is set to reduce the deficit to below 2.0% only in the 2024–2025 fiscal cycle.
  • Long-term spending plans assume stagnant public expenditures in 2023–2024 and a more notable cut in 2024–2025.
  • The government has abstained from introducing new direct taxes on individuals, but has frozen the income tax threshold until the end of 2028.
  • As it was broadly expected, the government introduced a temporary windfall tax of 45% on domestic energy producers.

Our View

The Autumn budget has set out to address the damage done by Hunt’s predecessor’s mini-budget, which saw a dramatic depreciation of the GBP and left a massive hole in public finances. The government has confirmed that it intends to maintain the energy price caps until April 2023 at GBP 2,500 and has vowed to introduce additional measures to protect vulnerable households once these expire. Additionally, the government has introduced a slew of measures to support businesses, including a reduced tax rate relief for small businesses and a price cap for business energy use. Overall expenditures, however, are set to increase dramatically, but much of the increase will go toward support measures, while individual department budgets are set to be practically frozen, representing a cut to spending in real terms. Spending on health and social care, which includes the National Health Service, is set to increase only by 0.2% over the initial Spring budget, which assumed a much lower rate of inflation, but will still register a strong nominal increase of 16.7% YOY—considerably above inflation.

The investment budget is set to increase by 4.6% YOY, but much of the increase will go toward higher defense spending. Investments from the Transport and the Business, Energy, and Industrial Strategy categories are set to decrease substantially during the next fiscal cycle and will return to 2021 levels in 2024. In real terms, the investment budget presents cuts to spending and, combined with the real cuts to departmental budgets, signals significant easing in B2G demand opportunities.

Finally, while the government intends to maintain the triple lock on pensions, the freeze of the income tax thresholds, which includes reducing the threshold for the highest band from GBP 150,000 annually to GBP 125,000, is likely to put more pressure on consumers. In effect, the freeze will significantly reduce the effect of higher wage demand from employees, compounding the negative effect of the fall in real wages, with middle-income consumers likely to feel a long-term negative impact on their disposable incomes. As such, demand dynamics in low- and middle-income households are set to remain soft, while increases in nominal wages are set to be less effective in sustaining consumer spending.

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