Philip Hammond is expecting to give himself some 'headroom' to react to any Brexit fallout when he delivers his Autumn Statement
Philip Hammond is expecting to give himself some 'headroom' to react to any Brexit fallout when he delivers his Autumn Statement © FT Montage

“I miss you most of all, my darling, when autumn leaves start to fall,” crooned Frank Sinatra.

Wednesday’s Autumn Statement on the UK’s public finances could set a similarly melancholic tone for UK assets. The chancellor of the exchequer, Philip Hammond, will step up for his first major set-piece address to parliament and is expected to reveal a £100bn hole in the country’s budget within the next five years as a direct result of Brexit.

HSBC predicts a rise in borrowing for 2017-18, taking it to £70bn from the £38.8bn forecast at the March Budget. That will mean gilt issuance of £155bn, according to the bank’s forecasts.

Liberum expects the tighter outlook to contribute to a change in the nature of policies encouraging home ownership, which could be felt among the larger housebuilders.

“The next round of measures should be less helpful for the majors as government seeks to broaden the tenure mix and boost smaller builders,” says Sebastian Jory, analyst.

The broker identifies support services providers as potential beneficiaries from any move to provide a measure of fiscal support to the economy, with Morgan Sindall and Costain well-placed to benefit from spending on the HS2 rail link.

The pound will probably be sensitive to the overall size of the fiscal package. Mr Hammond has stressed the importance of a disciplined approach — hardly the kind of lyrics to change the autumnal mood-music around UK assets as the first winter since the summer’s vote for Brexit draws in.

michael.hunter@ft.com

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