September 2025
The last UK bank holiday of the year is over, autumn has arrived and the push to the end of 2025 has begun. A late Budget (26 November) has been announced, and many will watch these announcements with interest as the Christmas season begins to kick in.
Having anticipated some market volatility over the summer (and as we know past performance is not an indication of future performance), we should remember that the postponement of many proposed US tariffs to the very start of August 2025 has now ended. Generally, the markets seem to have taken these in their stride, although certain countries have been hit hard.
As indicated at the start of this page, there is much to consider globally. Russia and Ukraine are still firmly in the news having reached well into the third year of hostilities, and the start of negotiations with the aim of bringing the conflict to an end. Increased spending on (national and collective) defence has been agreed over the next years and it almost has a feel of returning to the ‘cold war’ of decades ago.
Changing of debt parameters
The objective of the now not so new Chancellor is to effectively redefine the way the UK's debt rules work going forward. The planned effect is to allow the Chancellor to borrow more money for the next five years. We are talking about up to £50bn extra to help pay for the planned spending ahead, such as infrastructure spending. The risk is that interest rates remain higher than expected, costing us more over time. Subsequently, borrowing costs have elevated further and have not deviated downwards, putting more cost and pressure on the UK's already squeezed budgets.
More can be found on our late 2024 blog here: 30-october-2024-budget-the-headline-changes
Economic data from home and abroad
Mid-September saw the Office for National Statistics (ONS) confirm that the Consumer Prices Index (CPI) remained static at 3.8% in the year to August 2025. This unchanged position from July was mainly due to cost increases in food, hotel accommodation, and vehicle fuel at the pumps. The Bank of England target for UK inflation remains unchanged at 2.0%, and inflation is remaining above this level.
As a note, US inflation has increased slightly - consumer prices (before seasonal adjustment) increased to 2.7% over the 12 months to July 2025. However, the continued application of tariffs has seen some predict that US inflation will rise again.
The Bank of England reduced its base interest rate in early May 2025 to 4.25% (from 4.5%) and maintained this position for the rate decision in June 2025, thereafter cutting the rate again to 4.0% in August 2025 and holding at 4.0% in September 2025. The US Federal Reserve maintained their base rate (no change from April) to a range of 4.25-4.5% in May 2025, thereafter cutting by 0.25% to a range of 4%-4.25% in September 2025, reflecting concerns over the job market.
It should be noted that higher interest rates are good news for savers, and some savings accounts are offering 4.0% - 4.5% pa gross plus. Look out for the AER rate pa (Annual Equivalent Rate) which show the real rate of interest being provided. Of course, higher interest rates are not so good for variable rate borrowers, and the days of cheap borrowing for individuals and nations are over, certainly in the shorter term.
As you might anticipate, many financial thoughts will be UK focused; however, the world is now a small place and many of these economic factors are occurring globally, as we enter a new era of higher costs, inflation, interest rates and the like. Increasing numbers of global conflicts remain constant at this time.
We have looked at some of these points below.
GBP / US dollar
Many readers will know that exchange rates can vary for many economic reasons. For some, it may only become apparent when purchasing foreign currency for a holiday or visit abroad. The current indicated exchange rate is $1.34 at the time of writing (03 September 2025), still an elevated rate in recent times.
UK Net Public Sector Gross Domestic Debt v GDP
It is noteworthy that net public sector debt has consistently run for some time at approximately 95%-100% of UK monthly GDP (gross domestic product) (source: Office for National Statistics / ONS). The July 2025 figure has continued in a similar way with the statistics showing the provisional estimate as 96.1% and remains at levels last seen in the early 1960s. Some will not want to see this level (and its associated interest costs) rise.
The ONS notes that GDP growth in the UK to June 2025 for the prior three months was 0.3%, with GDP growth in the first quarter being stronger (0.7% in the first quarter). Many global trading areas saw their short-term growth forecasts reduced by the OECD (Organisation for Economic Co-operation and Development) in early June for 2025 and 2026 because of the recent trade wars.
Markets factor in most things
Turning to the recent market position, many individuals may refer to the value of their pension or ISA arrangements as a reference point to how markets are moving. We all know that the value of funds can fall as well as rise, and we have seen some volatility this year, although alongside positive returns from some global equity markets. Volatility is not uncommon, and this can be triggered by global economic events, or their continued effects.
The key point here is that if we think something is happening (such as the ongoing cost-of-living issues and rising tax costs), the markets have usually factored in the effects. Looking at the markets on 02 September 2025, in comparison to a year ago, we find the following (approximate) for a range of market indices:
FTSE 100:
FTSE All Share:
Dow Jones (US):
CAC 40 (France):
Dax 30 (Germany):
Market values can fall as well as rise and this is only a snapshot in time. As you can see, and as anticipated, some markets in this snapshot have performed better than others, although this is not a guarantee of future performance.
The tax year 2025 is moving on and there is much to consider
September 2025 sees the start of autumn and the start of the sixth month of the tax year 2025/2026, reaching a half-way point at the end. Most had originally anticipated that this year’s Budget date would be late October, however, the date has now been announced as the 26 November Budget 2025. UK inflation rates have remained elevated, and to some extent stubborn, with bank base rates and borrowing costs remaining higher than some anticipated. This, I am sure, will have a bearing on future fiscal announcements.
There continues to be much political and economic change and jostling globally. Being ready with your overall financial planning and household budgeting is likely to be a far better position than addressing financial issues at hand later.
We hope that you enjoy the start of autumn and don’t forget to use annual tax allowances where available and appropriate. The start of this month will see the return to school/education on the agenda for many households. We look forward to working with you over the balance of the year and beyond.
Keith Churchouse FPFS
Director
CFP Chartered FCSI
Chartered Financial Planner
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