Analyst comments on Reeves speech

Mark Watson-Mitchell - 04.11.2025

Daniela Hathorn, Senior Market Analyst, at Capital.com commented on how the upcoming Budget is likely to impact the markets and what it means for investors.

UK Chancellor Rachel Reeves delivered a sober pre-Budget speech this morning, signalling that she is prepared to make “necessary, not popular” decisions to safeguard the British economy.

She warned that since her last Budget, the world has thrown “even more challenges our way,” citing sluggish productivity, persistent inflation and elevated global borrowing costs.

Reeves did not explicitly restate Labour’s campaign pledge not to raise income tax, VAT, or National Insurance for working people, which could indicate an openness to revisiting those promises if the fiscal outlook worsens.

While she stopped short of announcing specific tax measures, Reeves made it clear that everyone “must do their bit” to protect public services and restore stability, laying the groundwork for potential tax rises in the months ahead.

She acknowledged the existence of a fiscal gap estimated at £20–30 billion, driven by weak productivity growth, sticky inflation, and higher global interest rates.

Overall, her comments framed a pragmatic approach to rebuilding fiscal resilience while managing public expectations ahead of the next Budget.

The market reaction has been limited, with gilt yields dropping marginally as investors welcome the emphasis on prudence.

Reeves’ comments highlighted a difficult fiscal situation in the UK, which in turn could have a negative effect consumers and business in tax increases possibly being are announced on November 26^th.

However, the FTSE 100, which had extended the losses into the morning's business, falling as much as 127.22 at the worst, actually closed better on the day - some 7.16 points to the fore at 9708.53.

My guess is that tomorrow morning's press will carry a substantial amount of criticism about this morning's performance and its meaningless content.

Scatter now?