Investment - Articles - Spring Statement and the gilt market

 “The announced spending cuts and efficiency measures indicate a commitment to fiscal responsibility. However, the increase in defence spending adds to expenditures, which may offset some of the savings from other cuts. No new tax increases were announced in the Spring Statement. However, measures to tackle tax evasion are expected to raise an additional £1bn. The absence of new tax hikes will further pressure the government to rely on spending cuts and efficiency measures to manage the current fiscal position.

 “The OBR has today significantly downgraded its UK economic growth forecasts for 2025 while upgrading the longer-term forecasts, projecting stronger growth beyond 2026 and improved tax receipts. The upgrade is primarily attributed to the governments planning reforms aimed at increasing housebuilding. These reforms are projected to elevate housebuilding to its highest level for 40 years by 2029/30, contributing an additional 0.2% to GDP by the end of the decade. This positive fiscal outlook has provided the government with flexibility to maintain fiscal headroom of around £9.9bn.

 “The Debt Management Office (DMO) has announced a total gilt issuance of £299.2 bn for the 2025/26 fiscal year, slightly below the anticipated £305-310bn. Longer dated issuance has been notably reduced to 13.4% of total issuance. The decision to shift issuance toward shorter maturities addresses current market dynamics which have seen pressure on the long end of the curve.

 “Ten-year gilt yields initially increased while the Chancellor spoke but have since fallen and are currently lower on the day responding to the shorter and lower-than-expected gilt sales announced”