ANALYSIS: Clouds gathering ahead of Chancellor’s Autumn Statement

As we enter winter there are clouds on the horizon for the United Kingdom economy and Chancellor George Osborne has to deliver his Autumn Statement against an increasingly murky backdrop.

ANALYSIS: Clouds gathering ahead of Chancellor’s Autumn Statement

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“The level of borrowing is above previous expectations and is clearly not going in the direction Chancellor George Osborne was hoping for,” Schotanus continued. “Among others, this has likely ramifications for next week’s Autumn Statement. We expect the latter to show an increase in the borrowing requirement for the 2015/2016 financial year, since current trends suggest borrowing will overshoot the existing target of £69.5bn. This will confront Mr Osborne will a stark choice in order to protect his cherished surplus for 2019/2020; either to dress up warmer, i.e. borrow more, or stay inside, i.e. cut spending,” Schotanus concluded.

Investec’s Chris Hare is not overly concerned at this stage but he said ‘a difficult balancing act could be in prospect.’

“It would take a much, much bigger borrowing overshoot to make us really worry about the overall fiscal sustainability of the UK,” he said.  “But this year’s borrowing numbers could make George Osborne’s desire to bring the public finances into a £10bn surplus by 2019/20, as expressed in his July Budget, a bit more difficult.”

While troubled public finances do not automatically hurt the prospects for UK equities, the situation feeds into a wider picture of increasing uncertainty. 

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