Leading Indicators | Autumn Budget 2025: need to know

Chancellor lifts fiscal headroom

The Autumn Budget signalled a shift toward fiscal consolidation, with fiscal headroom rising to around £22bn from £9.9bn in March. To support this, the Chancellor set out £26bn in tax increases, a package that will push the tax burden to a record level by the end of the Parliament.

But bulk of fiscal adjustment deferred to 2029-30

Much of the consolidation is scheduled for the later years of the forecast, with the largest tax and spending measures falling in 2028–29 and 2029–30. The plans imply a tightening of around £17bn in 2029–30 (about 0.5% of GDP). Key drivers include the extension of the income-tax threshold freeze into 2028–29 and higher employer NICs on salary-sacrifice pension contributions  

A bond market budget? Long gilts are finally falling

Market reaction was relatively steady, though gilt yields did move lower after the announcement. The 30-year yield dropped by around -11bps on the day and now sits near 5.22% - well below the peaks seen in September, when long-dated gilts reached their highest levels in over a decade. The drop mainly reflects softer inflation expectations and a shift in market pricing for the BoE’s rate path, both of which have been pushing yields down.