This month’s Autumn Budget is expected to see Britain’s new Labour government commit upwards of £10 billion for new investment, according to Deutsche Bank analysts.
As Chancellor Rachel Reeves gears up to deliver the budget on October 30, Deutsche forecast Labour would be bound to leave headroom as the results of a spending review in March were awaited.
Labour has already “toned down” commitments to pump £28 billion a year into the UK’s green transition, Deutsche analysts said.
This had fallen to £15 billion before being dropped altogether, with just a third of the spending set to have come from new money.
According to Deutsche, this “raises the bar for big investment,” after previous pledges revolved around Great British Energy, the National Wealth Fund, British Jobs Bonus and Labour’s Warm Homes plan.
“Despite the merits of boosting investment, the chancellor will almost certainly be aware that large borrowing sprees won't be risk-free,” analysts noted.
“A modest shift in net spending” was expected as a result, leaving scope for £10 billion in new investment funded by borrowing.
This could well stretch to £20 billion depending on how fiscal debt rules are defined, Deutsche added, with five-year aims to bring debt to gross domestic product down expected.
A £10 billion injection of new money would leave public sector net investment on course to settle around 2.25% to 2.50% of gross domestic product, the bank said.