Leading global asset managers overseeing $5 trillion+ — including Amundi, AXA IM, Allianz Global Investors, and Franklin Templeton — are urging UK Finance Minister Rachel Reeves to double the country’s fiscal headroom to £20 billion ($27B) in the upcoming November 26 budget.
Their message is clear: credibility and flexibility are the new currency of confidence.
💬 Investor Perspective
“We need to be convinced it’s going to translate into actual policy,”
said Gregoire Pesques, CIO of Global Fixed Income at Amundi, who has recently turned bullish on UK gilts.
Without a stronger buffer, investors warn Reeves could face pressure to raise taxes again next year, risking market confidence and bond stability — still fragile after the 2022 mini-budget crisis.
📊 Key Proposals
🔹 Double fiscal headroom to 20B to guard against shocks
🔹 Raise income tax — the “most credible” option, per AXA IM’s Nicolas Trindade
🔹 Avoid inflationary measures that could stall Bank of England rate cuts
🔹 Target spending cuts of at least £5B — especially in welfare and disability programs
Economists estimate Reeves must find £20–30B in savings to meet fiscal rules requiring a balanced non-investment budget by 2029–30 and declining public liabilities as a share of GDP.
⚖️ Balancing Credibility and Growth
While higher income tax could strengthen fiscal resilience, investors caution against inflationary moves — such as minimum wage hikes — that could offset gains.
“Whatever policy they enact must not increase inflation… or it will block BoE rate cuts,”
noted Trindade of AXA IM.
🔹 The Takeaway
The debate around Reeves’ budget highlights a pivotal shift in post-Brexit fiscal strategy:
Markets are rewarding discipline, not stimulus.
For the UK, doubling its fiscal buffer could mean the difference between short-term stability — and long-term credibility.