The Weekly Briefing from Capital Economics More AI bubble fears, the UK Budget countdown and Saudi Arabia’s global pivot
Nov 21, 2025
Ruth Gregory, Deputy Chief UK Economist, dissects the turbulent lead-up to the UK's autumn Budget and its potential economic impact. Jonas Goltermann, Deputy Chief Markets Economist, raises concerns over the sustainability of the AI-led stock market rally, drawing parallels to past bubbles. Meanwhile, Neil Shearing, Group Chief Economist, discusses the implications of the recent Trump-Mohammed bin Salman meeting and the shifting dynamics in US-Saudi relations amid a fracturing global economy. Expect insights on fiscal policy, market risks, and geopolitical shifts.
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Soft Data Makes Big Tax Hike More Likely
- Recent soft UK data and higher borrowing make a large tax-raising autumn budget more likely.
- Gregory expects this will increase the chance the Bank of England cuts interest rates next year.
Many Small Taxes Can Hurt Growth More
- A smorgasbord of many smaller tax rises can be more harmful for growth than a few large, clear taxes.
- Smaller taxes need to be higher and may weaken work, investment and saving incentives, warns Ruth Gregory.
Use Credible Tightening To Ease Rates
- Use credible, sufficiently large fiscal tightening to lower inflation and interest rates.
- Ruth Gregory expects about £38bn of tax rises will reduce inflation and allow bigger-than-expected BoE rate cuts.
