Liquid Insight: UK: Gearing up for super Thursday.

研报英文原文证据摘录

Liquid Insight: UK: Gearing up for super Thursday.

ses near term policy uncertainty and somewhat tighter

financial conditions, which could weigh on growth. Sentiment data has weakened

somewhat on the back of both global uncertainty/higher energy prices but also domestic

political uncertainty. The key question remains: What would the path of fiscal policy be

post a potential leadership change? There is a large amount of uncertainty on this front.

1) Scenario 1- Starmer remains as PM or Streeting wins.

Markets are likely to price in broad policy continuity, including continued commitment to

fiscal rules. That said, fiscal pressures would remain elevated, particularly across energy

(we expect targeted, temporary support for low-income households costing low single-

digit billions), public services (current plans imply real-terms cuts to unprotected day-to-

day spending from 2028/29) and defence spending. And in any case the fiscal space has

reduced- we estimate that since March, the headroom has been reduced by close to

£10bn from £23.6bn.

The government has recently flagged risks that defence spending is likely to cost an

additional £13-15bn over next four years, potentially capital heavy and possibly funded

by cuts in other capital spending (1% cuts in capital spending across departments costs

£6bn) or taxes. Overall, we think spending pressures are likely to be met by cuts in other

spending, higher taxes or near- term borrowing followed by medium term tightening (i.e.

within the confines of fiscal rules).

2) Scenario 2- A soft left candidate wins.

So far commentary from soft-left is that fiscal rules are likely to be met, which we would

expect in the near term to avoid a negative market reaction. But it may get more

complicated in the medium term.