The latest economic news and market highlights from the UK and abroad.
This week's headlines:
UK inflation rises again – due to the ongoing surging cost of fuel, inflation rose 3.5% year-on-year in September, ahead of analyst expectations.
Chancellor rejects calls to raise Capital Gains Tax (CGT) – after much speculation, John Healey was reported to have rejected calls to raise CGT in the upcoming Autumn Budget.
Musk mulls Tesla/SpaceX merger – on Tuesday, the world’s richest man formally confirmed his support to combine the two companies. The two firms have a combined market cap of $3.5trn, and the proposed merger would be the largest in stock market history.
Gas drilling green light – the UK government has approved new natural gas drilling plans at the Jackdaw gas field in the North Sea, a move environmental campaigners have strongly criticised. The project’s developers say that Jackdaw could account for around 6% of North Sea gas production.
What this means for financial advisers and clients
Rising fuel costs squeeze consumers
UK inflation rose again in September; headline CPI hit 3.5% year-on-year, up from 3.1% in August and ahead of analyst expectations for a more modest 3.4% increase. The figure is the highest in nearly a year.
September’s uptick was mostly caused by higher prices for motor fuels - rising nearly 30% over the last 12 months, as the conflict in the Middle East continues to choke the supply of refined products - particularly diesel - from the region.
But, not all data pointed in the wrong direction: food price inflation remained subdued at 1.3%, though complex supply chains mean it can take much longer for elevated fuel and fertiliser prices to feed through into prices on the shop floor.
Surging inflation is contributing to higher government borrowing costs, creating a major headache for Chancellor John Healey ahead of next week’s Budget. The Office for National Statistics (ONS) estimates that higher inflation added £4bn of debt interest costs in September alone. Last month’s government deficit – the difference between government spending and revenue – was also higher than expected, at £24.5bn. With the Budget fast approaching, increasingly strained government finances could curtail the ability of the Chancellor to ease pressures on consumers facing a renewed cost of living squeeze.
Chancellor rules out CGT changes
Sticking with the Chancellor, on Tuesday, Healey was reported to have dismissed calls from some Labour MPs for an increase in CGT at next week’s Budget.
High profile cabinet ministers including Wes Streeting and Louise Haigh previously voiced support for raising the tax bands, suggesting they should be more closely aligned with the equivalent income tax rates. However, the Chancellor is said to be concerned that such a move may ultimately cost the government money, should wealthy people leave the country or defer the selling of assets.
And a HMRC study seems to support these concerns: analysis from 2025 showed that lifting the lower rate of CGT by 1% could raise just £5m by 2028-29, but increasing the higher rate by 10% (to bring it more in line with income tax) could reduce Treasury receipts by £3.6bn.
Musk mulls mega-merger
When asked on Tuesday whether a Tesla and SpaceX merger would be a good idea, Elon Musk’s answer was an unequivocal “yes”. The proposed merger would combine Tesla’s cars and robots with SpaceX’s rockets, data centres and satellites. Musk, who is Chief Executive of both, argues the businesses are natural partners given their shared work on chips, AI and other tech products. Were it to be approved, the newly created company would be one of the largest in the world at current market cap(s), and the merger would be the largest of its kind in stock market history.
However, getting a deal over the line won’t be easy. While SpaceX’s dual-class share structure affords Musk 82% of the voting power, he only holds 20% of Tesla’s, meaning he would need buy-in from others on the shareholder register. There are regulatory issues as well, including anti-trust and anti-competition considerations, and national security concerns; China is one of Tesla’s largest markets, and policymakers will look dimly on any data sharing arrangements given SpaceX’s US defence business.
The proposal also comes at a challenging time for Tesla’s core automotive business. Wednesday’s third-quarter results showed a 2% year-on-year decline in new vehicle deliveries, as global rivals (particularly Chinese manufacturers) continue to launch newer, often cheaper models.
Pizza lovers, look away
A week-long trucker’s strike in Southern Italy has halted production of Italian buffalo mozzarella, leading to severe shortages in supermarkets. The strike is in response to high diesel prices – largely a consequence of events in the Middle East – which have prevented both the delivery of buffalo milk to dairies and finished cheese from reaching customers. Tomato growers and pasta makers have also been affected in a triple blow for fans of Italian cuisine.
Chart of the week: Jackdaw oversold
Source: The Guardian, October 2026 - North Sea Transition Authority.
Note: demand data is based on the UK's net zero strategy.
Why’s this worth sharing?
On Wednesday, the UK government formally approved the Jackdaw gas field. Located roughly 150 miles east of Aberdeen, Jackdaw is one of the largest undeveloped gas fields in the North Sea. It was initially approved in 2022 before being ruled unlawful after a legal challenge over how emissions released from burning the gas were assessed. The field’s developers (Equinor & Shell) argue that Jackdaw could account for 6% of North Sea gas production and bolster domestic energy security. Andy Burnham expects the project to “protect hundreds of jobs”.
Environmental campaigners have called for new North Sea projects, including Jackdaw, to be abandoned, citing a lack of compatibility with the UK’s climate ambitions. Gas from the project – expected to be flowing by the end of the month – will only account for roughly 2% of UK demand over the next ten years. Campaigners argue the project has been oversold in terms of its impact on energy security.
The debate is likely to continue long after the first gas is brought to market. But either way, its approval will do little to reverse the long-term decline in North Sea output. Gas production is forecast to fall around 31% between 2025 and 2030 and even with a more supportive policy backdrop, the decline is structural. Driven largely by the depletion of major fields, a return to peak production is unlikely regardless of which party holds power.
The Markets
UK: The UK markets fell alongside global markets. September’s higher than expected inflation reading weighed on more domestically focussed mid-cap stocks.
US: The index was broadly flat despite a chip stock sell-off, with more value-orientated sectors including financials and consumer staples proving resilient.
Europe (ex UK): Equities declined on AI funding concerns and rising oil prices.
Japan: Tracked global markets lower - the rising price of oil weighed on sentiment in a region highly dependent on energy imports.
Asia Pacific ex Japan: Top three index constituents: TSMC, Samsung Electronics and SK Hynix all lagged as chip stocks sold off. Investors are growing increasingly concerned about the financing required to sustain the AI boom.
| Name | Weekly change | YTD change |
|---|---|---|
| FTSE Actuaries UK Conventional Gilts All Stocks | 0.41% | -1.21% |
| IA Sterling Corporate Bond | -0.11% | -0.85% |
| IA Global High Yield Bond | -0.38% | -0.20% |
| FTSE All Share | -1.41% | 10.90% |
| FTSE USA | -0.05% | 13.25% |
| FTSE World Europe ex UK | -1.74% | 5.05% |
| FTSE Japan | -1.41% | 18.36% |
| FTSE Asia Pacific ex Japan | -2.48% | 13.58% |
| FTSE Emerging | -3.10% | 6.50% |
Source: FE. GBP returns as at close of business on Thursday 22nd October 2026.
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