Credit Agricole CIB Research previews next week's UK Autumn Statement.

Ahead of the Autumn statement on 28 October, we expect Chancellor John Healey to focus on measures to meet some immediate fiscal demands and boost the government’s fiscal headroom, which has been eroded recently by higher borrowing costs and weaker property market. According to our estimates, the shortfall could amount to c.GBP10bn and include outlays related to cost-of-living support, the funding shortfall in the Defence investment plan and the policy package announced by PM Andy Burnham after assuming office, among others. We believe that the funding gap could be filled with both higher taxes and some increase in net borrowing," CACIB notes.

"The Chancellor may thus delay tackling the UK’s long-term fiscal challenges to the March 2027 budget. Among these would be government outlays related to Burnham’s policy agenda as well as measures to deliver the planned real spending squeeze and boost its defence budget to 3% of GDP, announced by the previous government. These possible policy choices are estimated to cost the government more than GBP60bn by 2029-30. Given the scale of the public spending plans, gilt and GBP investors should remain wary about any further rise of state borrowing and any fiscal austerity measures needed to mitigate it," CACIB adds.