UK borrowing figures to provide final health check ahead of Hammond’s budget – business live

Rolling coverage of the latest economic and financial news, including the latest UK public finances report

  • Economists predict UK borrowed around £7bn in October
  • September’s figures were best in a decade
  • Coming up: MPs grill Bank of England policymakers at 10am

Global investors seem to have shaken off the German election crisis.

Asian stocks hit a 10-year high overnight, with traders citing optimism over the strength of the global economy.

Where have all the Rogue Traders gone? Markets at highs, lots of self congratulation, complacency rife. More than likely one out there somewhere!

Even if October’s public finances do beat expectations this morning, Britain’s long-term borrowing needs are still worryingly high.

Economists at JP Morgan say Philip Hammond will be batting on a ‘sticky wicket’ tomorrow, as the independent Office for Budget Responsibility (Britain’s fiscal watchdog) may revise down its growth forecasts. That will have a nasty impact on how much tax revenue the government might take in over the coming years.

Next week’s budget will be significant for both economic and political reasons. The OBR is set to downgrade its view of potential growth significantly, forcing the Chancellor to pencil in either more borrowing or more austerity—a particular challenge given the domestic political backdrop.

The government lacks an overall majority and is under pressure to increase its financial offer ahead of the mid-December EU summit. The Chancellor is also under pressure to use fiscal policy to offer support to key parts of the electorate amid an ongoing real income squeeze, addressing these concerns while ensuring his budget has enough support in Parliament to pass.

This chart shows how the UK monthly deficit has fluctuated over the last two years:

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

We expect the public sector net borrowing requirement measure of borrowing to continue to undershoot the OBR’s forecast, providing some good news ahead of the Chancellor’s Autumn Budget on Wednesday. Indeed, we have pencilled in borrowing of £7.0bn in October, just below last year’s outturn of £7.5bn, leaving cumulative borrowing 7% lower than last year.

However, this will probably be overshadowed by downward revisions to the OBR’s forecasts for economic growth and therefore the medium-term outlook for the public finances.

Although Brexit uncertainty hangs over the UK’s long-term outlook, the economy continues to hold up well. Healthy tax receipts so far this year will likely lower projected borrowing modestly in the near term. The Chancellor ought to use this boost to finances to make a stronger commitment to budgetary discipline.

Unfortunately, the political barriers between Hammond and this sensible route forward are probably too large.

Related: Merkel hints fresh elections preferable to minority government as talks fail

European market opening call @LCGTrading $FTSE +5 points at 7394$DAX +8 points at 13066$CAC +5 points at 5345$IBEX -2 points at 10023

Continue reading…