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Here we look at the leading indicators in the world of economics.

for in-depth analysis into commodities, trade, equities and more with a focus on Europe.

Labour鈥檚 fiscal rules

Chancellor Rachel Reeves will unveil her first budget tomorrow, alongside the latest Office for Budget Responsibility (OBR) forecasts. Reeves is expected to propose a combination of spending cuts, increased investment, and tax hikes. Since taking office in early July, Reeves and Prime Minister Keir Starmer have repeatedly highlighted the challenged state of the UK鈥檚 public finances as they stand.

Reeves has confirmed plans to adjust the UK's fiscal rules to fund c. £20 billion in additional investment per year through increased borrowing. She is also anticipated to adopt a new measure - 鈥榩ublic sector net financial liabilities鈥� (PSNFL) - which accounts for financial assets such as student loans. This adjustment could allow Reeves to borrow up to an additional £50 billion annually by the end of the decade, while still have debt falling, under the Treasury鈥檚 forecasts.

What we know

What tax considerations can we anticipate from tomorrow鈥檚 budget?

Reeves has reaffirmed Labour鈥檚 manifesto pledge to not increase the burden on 鈥榳orking people鈥�. However, with a £22 billion fiscal gap to address, other revenue-raising measures remain under consideration. These may include potential taxes on capital gains, dividends, inheritance, non-domiciled residents, and fuel.

In line with Labour's drive to stimulate growth, Starmer recently pledged at the UK鈥檚 International Investment Summit to 鈥榬ip up鈥� regulations that hinder growth 鈥� a move aimed to support the construction of homes, warehouses, and data centres. As part of Labour鈥檚 broader initiative to boost foreign investment, more capital could find its way into commercial real estate ahead of the upcoming budget.

Changing dynamics

The broader context is that such budgets and policies lay the groundwork for long-term economic stability and growth. If Reeves' additional borrowing is directed toward growth-enhancing capital projects, such as improving Britain鈥檚 infrastructure, this could significantly bolster the UK economy鈥檚 long-term growth prospects.

Notably, in recent IMF projections, the UK saw the second-highest growth upgrade among G7 countries after the US, with GDP expected to grow by +1.1% this year鈥攗p from previous forecasts of +0.7%鈥攁nd by +1.5% in 2025.

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