At just after 12.30pm on Wednesday, the machine will be listening, the trading algorithms ready, and billions of pounds of buy-and-sell orders stacked up awaiting Rachel Reeves’s budget.
For the first time on the London trading floor of Deutsche Bank, a custom-built artificial intelligence tool will tune in to the chancellor’s speech. It will transcribe her words, spot shifts in tone and spit out alerts when the numbers deviate from expectations.
“As we get it, in real time, we’ll be able to decipher it,” says Sanjay Raja, the bank’s chief UK economist. The natural language model has been trained on the entirety of Reeves’s recent public appearances: media interviews, conference speeches, the spring Office for Budget Responsibility (OBR) forecasts and last year’s budget. All with the aim of giving the bank an edge in one of the most heavily anticipated budgets in recent history.
“There are some high, high, high, expectations going into 26 November, for the budget to deliver on the part of the City,” says Raja.
This is the age of the bond market budget. After an explosion in government borrowing over the past decade; a sharp rise in debt interest costs, and with the scars of the Brexit vote and Liz Truss’s mini-budget still fresh, how the market reacts is critically important.
For months, Reeves has been schmoozing the biggest players in the £2.7tn UK government debt market, including hosting the bosses of Goldman Sachs and JP Morgan in Downing Street, in a bid to ensure smooth passage for her multibillion-pound tax and spending plans.
What the market thinks has been pored over by commentators throughout the budget buildup, anthropomorphising the electronic transactions executed on trading systems the world over. The fear is that upsetting the market could trigger a sell-off – driving up borrowing costs for the government, mortgage holders and businesses. That could trigger a domino effect that in turn costs Reeves and Keir Starmer their jobs – potentially paving the way for a new Reform UK-led government.
Reeves was given a taste of the bond market’s power earlier this month when government borrowing costs spiked after it emerged she had ditched plans for a manifesto-busting increase in income tax.
In reality, the market for UK government bonds, – known as gilts – is not of course controlled by a single, shadowy figure, but rather a panoply of institutions and people, sat behind trading desks across the City, Canary Wharf and other financial centres.
On the trading floor of the FTSE 100 insurer Phoenix Group, with views overlooking London’s Old Bailey, Samer Refai will be ready behind his Bloomberg terminal. With £300bn of assets under its control, including billions of pounds-worth of gilts held to back the pensions, savings and life insurance of its 12 million customers, budget day is a big deal.
“You must have heard the famous quote…
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