Britain's Finance Minister Philip Hammond will set out the first formal spending commitments of Prime Minister Theresa May's Conservative government Wednesday as slowing growth and rising borrowing costs in advance of its EU exit continue to trouble investors.
Hammond, who is officially referred to as Chancellor of the Exchequer, will address parliament at around 12:30 GMT in what is known as the Autumn Statement. He is expected to reveal modest spending increases to ensure the country's economic recovery isn't derailed by its vote to leave the European Union on June 23 but will likely announce no major changes to the government's overall pledge to maintain fiscal austerity.
However, Hammond will nonetheless be faced with what could be a £100 billion ($124 billion) 'black hole' in the nation's finances over the next five years as slower-than-expected growth hammers tax revenues and borrowing costs rise. The gap is almost certainly expected to force Hammond, who replaced former Chancellor George Osborne only a few months ago, to abandon the government's pledge to balance the nation's budget by 2020.
The U.K.'s independent Office for Budget Responsibility will also publish fresh near-term economic forecasts alongside the statement, with analysts expecting its 2017 GDP estimate to be trimmed to 1.2% from its 2.2 forecast in March but keep its 2016 estimate of 2% unchanged.
Benchmark U.K. government bonds, known as Gilts, fell slightly at the start of trading, lifting yields to around 1.38% as traders maintained a cautious stance against any increase in borrowing from the statement. The Institute for Fiscal Studies has forecast that Britain will need to tap bond markets for an extra £30 billion between now and 2020 in order to stabilise finances.