Global Research Unlocked UK budget
Nov 15, 2025
Ali Panani, Head of UK Economics at BofA Global Research, discusses the limited fiscal headroom and challenges in consolidating budgets without hindering growth. Agnes Stengarait analyzes gilt issuance implications and market reactions post-budget, emphasizing short-term rate pricing. Kamal Sharma dives into sterling dynamics, examining why the currency fell despite rising yields and what could help its stability. The trio provides a deep dive into the UK's financial landscape, revealing insights crucial for understanding future market moves.
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Tight Fiscal Headroom Raises Stakes
- The budget is crucial because the Chancellor holds only a small fiscal headroom versus historical norms.
- Delivering credible consolidation without derailing growth is the central challenge, says Ali Panani.
Which Fiscal Rule Binds
- The government's binding fiscal rule is to balance the current budget by 2029/30 and the OBR estimated only £9.9bn headroom.
- The investment rule on public sector net financial liabilities is less binding with larger headroom.
Why Headroom May Become A Shortfall
- Gilt sell-off, welfare U-turns and likely productivity downgrades threaten to turn headroom into a shortfall.
- Panani estimates a near £25bn hit and needs ~£30–35bn consolidation to add only £5–10bn buffer.