Major global investors broadly welcomed Chancellor Rachel Reeves’ tax-raising budget, which doubles the UK’s fiscal headroom and exceeded market expectations. But many warn the optimism may fade if growth underperforms, as most of the £26B tax hikes are back-loaded.
🔹 What Investors Are Saying
- Vanguard added to its gilt positions, saying the budget supports continued BoE rate cuts.
- Allianz GI remained bullish.
- But Franklin Templeton, Northern Trust, BlueBay, PIMCO and Fidelity all stayed cautious, pointing to front-loaded spending and delayed revenue.
🔹 Key Concerns
- Growth disappointments could quickly erode fiscal headroom.
- Investors prefer Spanish and Italian bonds over UK gilts.
- Some expect another tax hike next year, marking a third consecutive increase.
- Recent gilt rally was driven more by cancelled bond sales, not budget strength.
🔹 FX Market Reaction
Sterling jumped to its highest level since late October, though longer-term sentiment remains bearish due to slowing growth and expected rate cuts.
📌 Takeaway
The budget gives the UK more breathing room—but credibility will depend on execution, growth resilience, and political stability in the months ahead.