ING warns rising debt costs and potential policy shifts under PM Burnham could heighten investor concerns ahead of the autumn budget.
The UK faces growing fiscal strain from rising spending pressures and high debt interest costs, despite ongoing consolidation efforts. Public finances are stretched by demands in defense, health, and social care, while debt servicing costs climb due to index-linked bonds and reliance on foreign investors, including hedge funds.
Tax revenues have increased as a share of GDP due to frozen thresholds since 2021, pulling more earners into higher brackets. While investors initially welcomed Prime Minister Burnham’s commitment to existing fiscal rules, his openness to policy changes, such as lifting tax-free allowances, has reintroduced uncertainty.
The autumn budget could refocus attention on UK fiscal risks, particularly if stimulus measures or shifts in gilt issuance alter the Bank of England’s calculus.