UK bets on a boring budget

Katie Martin (0:00)

Yet again, we're rolling towards Budget Day, when Brits do what we do best. Looking slightly silly with some quaint traditions, while also laying out the government's tax, spending and borrowing plans. On the 28th of October, the new-ish Chancellor John Healey will wave his red briefcase around and head to Parliament to tell MPs the score. As for every Chancellor, for non-Britz, that's what we call our Finance Minister, he has a tricky task. Ideally, what we all want is more spending on stuff we all care about for less money, free ponies for everybody, and year-round sunshine. So today on the show, what acrobatics will Healey seek to perform to try and please all the people all the time?

This is Unhedged, the Markets and Finance podcast from the Financial Times. I'm Katie Martin, a Markets columnist at FT Towers, where everyone is limbering up for Budget Day.

It's a Brit takeover today, boys and girls, because joining me in the studio, we have straight up econ nerd, Chris Giles. Chris, you're back. It's been a while.

Chris Giles (1:06)

It's been a while, but I'm delighted to be here.

Katie Martin (1:09)

So I want to start with the state of the UK economy itself, because I think there's this idea out there that apart from people who live in castles, like we're all poor and living on roadkill and tree bark in like a hopeless, backward economy, wishing we were all rich and American with good teeth. But I mean, actually, I think we're doing all right, actually, aren't we?

Chris Giles (1:35)

This year, we're definitely doing all right. It's not been a vintage few years for the UK economy. It's been growing. But this year, suddenly the growth has picked up and that's not what we expected. So we've had unexpected good news. So if you compare, we, because we're quaint and do things differently, we have monthly GDP numbers.

Katie Martin (1:54)

Which you can argue is stupid, but anyway, here we are.

Chris Giles (1:57)

You can argue is stupid, but they are season-adjusted. So you can at least, in theory, just have a look at how well are we doing in August, which is the latest data compared with December. So how much growth has it been so far in the eight months of 2026? What do you reckon?

Katie Martin (2:14)

Oh, God, I don't know. You're putting me on the spot now. Tell me, tell me.

Chris Giles (2:18)

1.8 percent.

Katie Martin (2:19)

That's OK.

Chris Giles (2:20)

Two-thirds of the way through the year.

Katie Martin (2:22)

That's pretty good.

Chris Giles (2:23)

If we get to the end at that growth rate, we'll do better than America this year.

Katie Martin (2:27)

I like how whenever the UK puts out growth numbers and they're quite good, everyone's like, oh, the stats must be wrong. There must be some.

Chris Giles (2:35)

Well, our stats and our GDP stats have been wrong quite often in recent years. So you have to treat this with a little bit of caution. But so far this year, it looks OK. And much better than we expected because Britain is like the whole of Europe, but this is not a UK thing.

We import a lot of energy because we don't have that much ourselves. Even if we did more drilling in the North Sea, we'd still be big energy importers just like the rest of Europe. So when the price of energy goes up, we just get poorer. That is just the simple maths of it, because what we import gets more expensive and what we export gets relatively cheaper and that's just tough. It's not very pleasant. So you would think that when we think about the budget, the big picture and what the expectation was, was it was all just going to be doom and gloom, because we're poorer because energy prices have gone up, not our fault. Someone else has created some wars somewhere, which has made oil and gas prices go up. And then you have to distribute the losses. Now, there is going to be a bit of that in the budget. It's going to be very much brushed under the carpet. So there's two things going on. One is that we are poorer because energy prices have gone up, but also the growth figures and the economic figures have just been better than we feared.

Katie Martin (3:55)

Yeah. So some of that kind of relative cheerfulness for us, that comes relative to expectations, but also like the IMF gave us a pat on the back recently, right? And said, you're kind of doing the right things. Yeah.

Chris Giles (4:09)