Autumn Budget 2026: treading a fine line

Piers Hillier, Chief Investment Officer

"Although the new Chancellor and Prime Minister have tried to put their stamp on things, markets have been keen to see more fiscal discipline after two Budgets that added significant costs to business, without the proceeds of those tax increases being used in a way that supports UK growth.

The Chancellor announced, as expected, an additional tax on UK banks. Whilst politically appealing, there is a significant risk that this will reduce growth and risk appetite to invest in the UK. Banks in the UK already pay higher taxes than any others in Europe and ‘raids’ such as this, as we have seen with North Sea energy in the past, tend to stymie economic growth.

The approval of the Jackdaw gas field in the North Sea is a useful counterpoint to this. The decision to approve drilling at the Rosebank oilfield should go ahead and would go some way to restoring confidence.

My expectation is that this Budget could pave the way for an early general election."

Adrian Gosden and Chris Morrison, Investment Managers, UK Equity Income

"From our stance as UK equity income fund managers, the Chancellor’s plan to raise the surcharge on UK banks (from 3% to 6% and limited to 15 months) seems manageable under the circumstances – and it is below the 8% levied by former Chancellor George Osborne.

On housing, we will need to see further details on the government’s ‘Your First Home’ program, which Chancellor Healey announced will get £4.7 billion in government backed borrowing, as well as on the plan to allow land sales for social housing without VAT to incentivise this type of building. We are hopeful these proposals will provide a boost not just to homebuyers but to the UK construction sector at a time when homebuilders have been struggling with weak demand.

We speak regularly to excellent companies throughout the country and we remain confident that UK market remains an attractive place for income investors."

Huw Davies, Investment Manager, Global Macro Solutions

"Rachel Reeves’s October 2024 Budget has loomed large in the government’s thinking as Chancellor John Healey delivered his first. He was keen to avoid the poor market and media reaction that followed Reeves’s Budget, when concerns centred on limited fiscal headroom, higher borrowing and the potential impact of increases in employers’ National Insurance contributions on growth. For now, the UK has also benefited from the markets’ attention being drawn elsewhere, particularly to France’s fiscal and political pressures.

Healey appears to have struck a balance between supporting households and businesses and maintaining confidence in the public finances. The measures leave a credible buffer against the fiscal rules, without adding significantly to borrowing or weighing materially on growth, giving markets some grounds for reassurance. The focus on France may also give UK assets breathing space. But that would not remove the need for a convincing plan to improve the UK’s medium-term fiscal position, alongside a more sustained upswing in growth. Even more difficult decisions remain into the end of this parliament."