We are certain taxes will rise, and that takes money out of the economy. Research firm Capital Economics estimates the Budget will knock 0.2% off GDP in 2026 – a meaningful hit to an economy that only grew 0.1% in the third quarter of this year.
However, as the chancellor pulls money out of the economy, the Bank of England is likely to push money back in by lowering interest rates, encouraging people and businesses to borrow and spend.
And, as one senior government adviser told the BBC, that means a lot of the “big things” that affect business confidence, including inflation, are expected to fall next year. I would expect the chancellor to accentuate those positives.
When it comes to business, the government will in part want to be judged on what it does not do in this Budget: no more nasty surprises, no blanket tax rises.
