Weekly Briefing

John Healey has announced the date of the Budget. Wednesday 28 October will be the earliest Autumn Budget since 2021, chosen — we are told — to end the speculation over who will pay for the Government’s promises. That was the theory. In practice, fixing the date merely gave everyone a deadline by which the Chancellor must explain the arithmetic he has so far preferred not to discuss.

The timing was not especially kind. The same week brought a war spreading onto Egyptian territory, fresh attacks on US forces in Jordan, direct US strikes on Iran, and a Bank of England where the minority demanding higher rates has grown from two members to three. The message from Threadneedle Street is becoming harder to ignore: inflation risks have not gone away, even if the majority is still prepared to wait.

Then there's the £850 million electricity VAT cut, supposedly funded by cancelling an unfunded scheme. That is certainly imaginative. Whether the Treasury can spend the same missing money twice is presumably one of the details being saved for October.

Politics offered little more comfort. Labour held Greater Manchester comfortably, but only one voter in four could be bothered to turn up. Clacton will tell us whether that indifference is local — or merely spreading.

None of this constitutes a fiscal crisis. Gilts were broadly steady, equities reached another record and Healey still has room to act. Markets are not endorsing the Government's arithmetic. They are simply reserving judgment until 28 October. The Budget is no longer just another fiscal event. It is the first serious test of whether this Government's promises can survive contact with the numbers.

And while Westminster wrestles with £22bn fiscal holes, my local Wetherspoons has quietly raised a pint by 11p. This one, at least, has been fully costed.

Healey has fixed 28 October to control the narrative on tax and spending. This week supplied three separate reasons why the narrative may end up controlling him instead.

The fiscal starting point remains the one set out last week: borrowing in the first three months of the financial year was £57.6bn, £2.7bn above the OBR's forecast profile. Last week's claim that the £850m electricity VAT cut would be funded by cancelling digital ID also came under renewed scrutiny, after Darren Jones pointed out that the programme had never been specifically funded in the first place.

The Budget will also have to reckon with a bigger structural change moving alongside it. Prime Minister Burnham confirmed this week that English mayors will retain a share of locally raised business rates from spring 2027 and a share of income tax from 2028, replacing the ring-fenced grants that currently fund local projects. It does not change what anyone pays in tax — only how the revenue is split between Westminster and town halls — but it is a genuine transfer of fiscal power, and the Government has yet to say what proportion mayors will keep.

Ten-year gilts ended the week at 5.07% and thirty-year gilts at 5.78%, little changed despite the hawkish MPC vote and renewed escalation in the Gulf. The market is not panicking; nor is it offering Healey cheap room for manoeuvre. Any genuine funding gap will now have to be financed against a materially higher marginal cost of borrowing.

House prices barely moved in three and a half years. Repayment-supported borrowing capacity has fallen.

The arithmetic shows what higher mortgage rates have done to repayment-supported borrowing power. A fixed £1,000 monthly payment supported an illustrative £248,000 mortgage in January 2022; by June 2026 it supported £183,000 — 26% less. Over broadly the same period, the average UK house price barely moved, from roughly £274,000 to £271,000.

The Bank held rates again on Thursday. Three MPC members wanted Bank Rate raised to 4%. September’s QT decision may matter almost as much for gilt yields.

Bank Rate held for a fifth consecutive meeting.

The Monetary Policy Committee voted 6–3 to hold Bank Rate at 3.75% on Thursday. Megan Greene, Catherine Mann and Huw Pill voted for a quarter-point rise to 4%. Bailey told reporters the Committee was "not getting closer to a hike" despite the growing dissent, pointing to CPI inflation's fall to 2.6% in June. But he also flagged that energy prices remain "high and volatile" because of the war in the Middle East — precisely the risk that pushed three colleagues to vote the other way. The next decision is 17 September.

Markets now expect the Bank to slow its gilt-reduction programme from £70bn to £50bn a year from October, to be decided at the September MPC — and the Bank's own latest estimate is that cumulative QT has already added 20–30 basis points to 10-year gilt yields. A slower pace of sales would ease some of the upward pressure on the very yields that make Healey's own borrowing more expensive — a material lever on the Government's debt costs, alongside anything likely to be announced at the Budget itself.

June's headline lending number looks like a boom. It isn't — read on for where the real story is.

Wednesday’s Money and Credit release put some flesh on that number — and made clear why the headline needs treating with care. M4Lex lending jumped by £39.1bn in June, which at first glance looks like the start of a credit boom. It was nothing of the sort.

Almost three quarters of the increase came from pension funds, insurers and other non-bank financial firms, which swung from a revised £6.9bn of net repayment in May to £28.5bn of net borrowing in June. That is financial-sector volatility, not Britain’s households and businesses suddenly rediscovering their appetite for debt.

Strip it out and the picture is better, but much less dramatic. Household borrowing rose to £7.9bn from a revised £4.5bn, while private companies borrowed £2.7bn against £2.3bn in May. There is some genuine improvement in there. A boom it is not. GBTT’s full data release, linked below, is worth reading.

Mortgage borrowing picked up during the month — net lending jumped to £7.7bn from a revised £3.3bn in May, and approvals rose to 58,200, though still below their six-month average. None of it came cheap though: the effective rate on new secured mortgage lending rose to 4.35% from 4.22%.

Taylor Wimpey supplied the real-economy counterpoint. It trimmed its 2026 completions guidance to 10,600–10,800 homes, from 10,600–11,000, and slashed the interim dividend by 74% to 1.20p. Stretched affordability, geopolitical uncertainty and rising build costs are colliding with the Government’s housebuilding ambitions.

BP has put its UK North Sea business up for sale after six decades of production — the bigger structural story this week, even as an unclaimed attack in Egypt and confirmed strikes on Jordan and Kuwait moved the oil price.

A drone struck a gas storage vessel at Egypt’s Damietta port on Wednesday, setting it ablaze and spreading fire to a second vessel. Egypt confirmed the attack on Thursday; no party has claimed responsibility and the investigation remains open. The incident followed an Iranian missile attack on US forces in Jordan on Tuesday. American strikes on dozens of Iranian military targets then began at midnight UK time on Thursday and continued for two hours.

Brent settled at $90.17 on Friday, up 1.2% on the day. Oil feeds quickly into fuel, freight and production costs; household bills depend more directly on wholesale gas and electricity. Ofgem is due to publish the October price cap by 26 August.

Gilts and sterling took it largely in their stride. Ten-year yields closed at 5.07% and GBP/USD at $1.345, both close to where they began the week. The FTSE 100 touched another intraday record of 10,989 on Friday before easing to 10,868 — still up 1.2% over the week, despite Thursday’s hawkish MPC vote.

BP supplied the more uncomfortable signal. It has put its entire UK North Sea business — six decades of production, around 1,100 jobs and five production hubs — up for sale. Whatever BP’s internal reasons, when a major operator decides Britain’s basin is better sold than developed, it is reasonable to ask what the tax regime and energy policy look like from inside the industry.

Sainsbury’s has found a buyer for Argos — and a rather expensive answer to a ten-year experiment. Bought in 2016 for £1.1bn, the business is being sold to Swift Partners for at least £120m, alongside a £350m non-cash impairment. The deal covers 201 standalone stores and 466 concessions inside Sainsbury’s, with completion expected in February 2027. After a decade spent trying to bolt general merchandise onto groceries, Argos is changing hands for roughly a tenth of what Sainsbury’s paid..

Labour kept Greater Manchester, although not on anything resembling a wave of public enthusiasm. Bev Craig led with 47.2% of first preferences and defeated Reform’s Sian Astley by 66.3% to 33.7% after transfers. The more revealing number was turnout: just 25.1%, the lowest since the office was created in 2017 and down from 32% in 2024. Labour has the mayoralty. That does not, however, demonstrate deep public consent.

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