Market Update 6th October 2025

Don’t Wait

I went to Norway last weekend for the first time, to go to a wedding. My son, his partner and I arrived in Oslo and were picked up by some friendly Norwegians and driven about an hour south-west down the southern coast.

As we drove along we passed construction site after construction site. Road tunnels being dug through mountains, bridges over fjords being built about a hundred metres down-stream from the existing one but with more lanes. A fertiliser plant – I was told the biggest single polluter in Norway – was building the first large scale carbon capture facility in Norway.

Sometimes driver Tore told me they were just reshaping the road. It was first built in 1964 and used to wind round the hill that way he said, and now it’s going to be straighter and go this way. I asked why they were doing that and he shrugged and said it’s just better, though he used to like racing round the corners on the old road when he was younger.

Norway is one of the few countries in Europe to run a budget surplus. Reinvesting into infrastructure is one thing richer countries do to try to ensure future productivity.

We have touched on this previously. The UK government is extremely keen to stimulate infrastructure spending in the UK to try to grow our way out of our current problems. It is struggling to do this as the tax base is shrinking while spending is increasing, and they have promised not to touch most of the more significant tax sources.

The usual model people look at is the UK recovery after the Second World War. The UK debt to GDP now is just over 100%. After the war, it was a little over 250% and fell in a fairly straight line to its lowest point in the early 1990s when it was a bit over 20%.

Since then it has risen again in a fairly straight line to where it is now. Covid hasn’t helped but isn’t an especially significant contributor to this. It has been a gradual rise over three decades, but the main step up came from the 2008 financial crisis.

But most years since the war the UK still ran a budget deficit. We didn’t scrimp and save, we grew. UK GDP as measured by the ONS was consistently around 3%-5% all the way through to the 1970s and this solves a lot of problems, especially when compounded over several decades.

I’m not usually in favour of comparing government and personal finance, but it’s a bit like your mortgage which may be a burden in the early days if you stretch to buy a house but becomes more manageable as you get older and hopefully earn more. You grow your way out of it. The point here as well is that mortgages are productive debt. All being well you own a valuable asset at the end of it with a tax-free capital gain.

Norway is not the only one. Ireland was hit very hard in the GFC which took their debt to GDP up to nearly 120% but now has it back down around 40%, a similar level to Norway. How did they do that? Painfully – tax rises, pay cuts in the civil service, but also by attracting inward investment. A number of large US pharma companies have production in Ireland for example – it’s one of the things Trump has his eye on with tariffs. But they did it. Ireland is now looking to start a sovereign wealth fund – a laughable idea not long ago.

I would say the UK government problems are getting bigger rather than smaller. The ASDA income tracker is a free resource on the internet. It surveys income and spending trends in the UK and breaks it down across different income levels.

The most recent one showed a continuing divergence in discretionary spending power between the three lower income quintiles of the population and the two higher ones. The wealthier 40% of the country are getting richer and the lower 60% are getting relatively poorer.

Inflation is still higher than the government or anyone else would ideally like. A breakdown of the components of UK inflation shows non-discretionary household bills are still prominent – particularly energy, but water and phones as well. Food and non-alcoholic drink inflation is still over 5%. This is continuing to squeeze lower incomes. The job market has also been weakening, adding further pressure.

I would expect all this to be of interest to the government ahead of the upcoming budget and don’t think shuffling tax codes around is likely to be enough.

They have talked about growth then sabotaged the AIM market. If they want roads, bridges and carbon capture then they have a wide range of ready-made, mostly user-friendly investment trusts that do exactly this, which have also been treated badly over the last few years.

But the UK needs to work this out sooner rather than later because in my experience the world doesn’t wait for you. Ireland and Norway aren’t going to.

After the wedding the three of us flew back to England. When you go into Norway, they ask at the border what you’re doing there and check you have somewhere to stay. We had all said we were going to a wedding, and they seem to have made a note of it and asked me if I had a nice time at the wedding as we left. He was a big, burly older guy with white hair and a white beard, like an off-duty Father Christmas.

I said it was okay, and he asked how I ended up at a wedding in Norway. I told him it was my ex-wife and he burst out laughing. He gave my passport back and was still going as I trudged into the duty free.

Border control could use some work, but Oslo Gardermoen airport is a thing of wonder. It’s like Heathrow but nice and with a lot less people. The exchange rate is about 13.50 Norwegian kroner to the pound so unless your mental arithmetic is really good, you’re going to need a calculator and a reasonably firm constitution to order three beers in a Norwegian airport.

Robert Fullerton – Senior Research Analyst

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