The UK Autumn Budget in November introduced significant tax rises and extended freezes on income tax bands, expected to generate substantial revenue but impact consumer spending. The FTSE 100 remained resilient, edging closer to 10,000, whilst the labour market showed mixed signals with rising unemployment.
Sector performance diverged, with mining and healthcare leading gains, and gilt yields fell following budget clarity. Globally, the ECB kept rates steady amid sticky inflation, Japan's market gained on political optimism, and the US showed strength despite credit market concerns.
Investors navigated a complex environment of persistent inflation, geopolitical uncertainty and cautious central bank policies worldwide.
The big UK political event in November was the Autumn Budget (delivered on the 26th), in which the Chancellor outlined tax rises, tax increases and more government borrowing.
Analysts are still digesting the Budget, but a range of fiscal policy changes are likely to have significant knock-on effects on the broader economy.
In particular, the Chancellor’s decision to extend the “freeze” to income tax bands by another three years could cost a UK taxpayer up to £1,292 by 2031 (also raising £12bn in revenue).
The policy is expected to result in an extra 5.2m taxpayers as average wages go up over the coming years, and more people exit the tax-free Personal Allowance (£12,570). Moreover, an extra 920,000 people could end up paying the 40% higher rate.
This is just scratching the surface of the budget, and our advisers will have plenty more to say about it in the coming months to help clients navigate the complexities for their financial plans.
The Chancellor painted a mixed picture of the UK’s growth prospects in 2025, claiming that the country was on course for a 1.5% rise in GDP. However, the OBR downgraded its 2026 forecast to 1.4% - partly due to lower productivity growth.
Inflation (CPI) is still hovering above the Bank of England (BoE) target at around 3.4% this year. This is the highest in the G7 - a trend the IMF expects to continue into next year.
However, the budget deficit is arguably on a more positive course. The IMF expects UK public sector net borrowing to be £112.1bn (3.5% of GDP) in 2026-27. The year after, it should fall to 3%. Then 2.6% (28-29), 1.9% (29-30) and 1.9% (30-31).
The Chancellor estimates that 450,000 children will be lifted out of poverty by 2029-30 due to her decision to scrap the two-child benefit limit. Moreover, £150 is forecast to be taken off energy bills from next year (e.g. due to the ending of the Energy Company Obligation).
The FTSE 100 performed robustly in November, maintaining gains seen since October and edging closer to the 10,000 mark. The market reaction to the Autumn Budget was somewhat positive, with investors still digesting the Chancellor’s balanced approach to fiscal tightening while avoiding shock market disruptions seen in prior years.
The extended freeze on income tax bands and planned tax rises pose further risks to consumer spending (possibly dampening growth). However, the UK labour market shows resilience, with employment up but rising unemployment pushing the rate to 5%.
Sector performance diverged: mining and healthcare led gains, supported by higher gold prices and government contracts, while consumer discretionary sectors showed caution amid mixed retail footfall data.
Equity markets remained more attractive than gilts, as bond yields retreated following budget clarity. Gilt yields fell on expectations of slower borrowing growth ahead.
Overall, UK markets balance cautious optimism on fiscal policy with ongoing inflation pressures and productivity challenges shaping investor strategy.
Global equity markets were mixed in November amid varied regional dynamics. The ECB held rates steady but signalled potential hikes if inflationary pressures persist, as Eurozone inflation remains sticky around 4%.
Japan’s stock market gained momentum following the historic election of its first female prime minister, boosting market confidence and growth expectations.
In contrast, the US market showed robust performance despite concerns over credit market instability and slowing economic data. The tech and AI sectors continued to lead gains in the US, while earnings reports remained generally positive.
Global inflation concerns linger, influencing central bank policies worldwide. Emerging markets showed pockets of strength, benefiting from easing monetary policies and stable commodity prices.
Overall, investors navigated a landscape of geopolitical uncertainty and cautious central bank messaging, looking for selective opportunities amid a complex global economic backdrop.
Please note:
The value of investments can go down as well as up, and you may not get back the amount originally invested. Past performance is not a reliable indicator of future results. Tax treatment depends on individual circumstances and may be subject to change. This content is provided for informational purposes only and does not constitute investment advice. Readers should seek independent financial advice before making any investment decisions.
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