The FTSE 100 Index rose in October, outperforming most major regional markets as global technology stocks retreated. The blue-chip index’s relatively high exposure to energy and defensive stocks proved supportive, and it rose by 1.2% over the month, while the FTSE 250 Index fell by 4%.
- The OBR expects UK growth to slow in 2027
- Plans to cut the annual Cash ISA allowance were scrapped
- Inflation rose to 3.5% YoY in September
Tech retreats: the FTSE 100 Index rose in October, outperforming most major regional markets as global technology stocks retreated. The blue-chip index’s relatively high exposure to energy and defensive stocks proved supportive, and it climbed by 1.2% over the month, while the FTSE 250 Index fell by 4%.
“‘The UK’s economic and fiscal position remains very challenging’” (OBR)
Lacklustre Budget: the Autumn Budget delivered a relatively bleak economic outlook for the UK. The Office for Budget Responsibility (OBR) warned: “The UK’s economic and fiscal position remains very challenging”. The OBR expects growth to slow next year, and predicted no growth in real earnings in 2027 or 2028. Real household disposable income per person is predicted to be only 1% higher than its pre-pandemic level in 2029-30. Elsewhere in the Budget, plans to slash the annual Cash ISA allowance from £20,000 to £12,000 were scrapped, but tax on income generated from cash or property was increased by another two percentage points. The Bank Corporation Tax Surcharge will temporarily increase from 3% to 6%.
Praise from IMF: the International Monetary Fund (IMF) upgraded its forecast for UK economic growth this year from 1% to 1.3%, but downgraded its 2027 forecast from 1.3% to 1.2%. IMF Managing Director Kristalina Georgieva commented: “The UK is actually one country where action to reduce the deficit has been taken decisively … we see the UK … enjoying a bit of a better growth prospect”. The UK economy grew by 0.1% in August compared with growth of 0.4% in July. Activity in the services sector flatlined over the month. The Office for National Statistics revised growth in the second quarter from 0.4% to 0.5%.
Rate rise on the horizon: stronger-than-anticipated inflation stoked expectations of monetary tightening. The annualised rate of consumer price inflation rose sharply from 3.1% in August to 3.5% in September, reaching its highest level since October 2025. According to the Office for National Statistics, prices for motor fuel rose by 29.8% in 12 months to September. Meanwhile, shop price inflation rose at an annualised rate of 2.1% in October, compared with a three-month average of 1.6%. Elsewhere, consumer confidence fell by 11 points between September and October, posting its largest decline since the 2016 Brexit referendum (excluding the pandemic). GfK described the drop as an “extraordinary collapse” as households became increasingly negative about the outlook for their finances.
To view the series of market updates through October, click here
