Chancellor John Healey is preparing his autumn budget for next month, facing perilous economic conditions influenced by global events and US policies. The US-Israel war on Iran is contributing to inflation and a significant shock to oil and gas prices, which in turn has triggered global financial market turmoil.
This turmoil is adding to the debt servicing costs for governments globally. US President Donald Trump's fiscal policy and threats of interference at the US Federal Reserve are also exacerbating the situation. Additionally, Trump's tariff policies are impacting industries such as the car sector, with Jaguar Land Rover recently announcing 4,000 job cuts.
Last week, the oil price reached $109 a barrel due to a flare-up in the Iran war, leading to a dramatic bond market selloff. The yield on 10-year UK government bonds rose to almost 5.4%, the highest level in nearly two decades. This renewed selling pressure comes at a critical time for Healey's budget preparations.
Official figures expected this week include a predicted slowdown in Britain's jobs market, with weaker wage growth and a rise in unemployment on Tuesday. Inflation figures on Wednesday are forecast to show a rise in the headline rate in August to above 3%. The Bank of England is scheduled to make its next decision on interest rates on Thursday.