LONDON, 5 December 2012 – Aon Hewitt, the global human resources solutions business of Aon plc (NYSE:AON), has commented on the announcement of the government’s increased projected borrowing requirements in today's Autumn Statement.

Tapan Datta, Global Head of Asset Allocation at Aon Hewitt, said:

“Thanks to weakening economic growth and persistent weakness of tax receipts, the government's projected borrowing requirement has been revised up every year for as far as the eye can see. The fact that OBR forecasts have been consistently overly optimistic since 2010, suggests that the downside risks of worsening economic growth and higher borrowing remain real. A higher borrowing requirement means higher gilt issuance, and a big question mark hangs over the gilt market's ability to withstand increased levels of new supply over the next few years. 

“The warning in the final statement of the Office of Budget Responsibility (OBR) summary is also revealing. It states that a key risk to these higher borrowing estimates is that the UK economy's ability to generate output may be weaker than it actually allows for. The growth recovery that the OBR envisages between 2014 and 2017 is already a tall order, averaging approximately 2.5% p.a.  Without more tax rises and spending cuts, the government's borrowing and call on the gilt market, risks being even larger in the event of economic output being weaker.

Tapan Datta continued:

“Today's revised gilt issuance statement from the Debt Management Office is neutral for gilts in the near-term as the surpluses from the Quantitative Easing programme have helped to cushion the government's borrowing needs for this year.  However, the larger borrowing needs pencilled in for coming years, and the accompanying gilt issuance statement, do not make happy reading.  Post-crisis issuance levels of well over £100bn annually are becoming a norm, with today’s projections showing issuance averaging £150bn over the 2013-2017period. 

“Gilt issuance at these levels would have been unthinkable only a few years ago.  A combination of luck and support from the Bank of England has meant that this is no longer so, but it would be wise not to count on all these transitory supports to the gilt market continuing.” 

Media Contact: 

Colin Mayes                                                 Adam Leviton
 Aon Hewitt                                                   Capital MSL
 01372 733689                                           020 7307 5339
colin.mayes@aonhewitt.com                  adam.leviton@capitalmsl.com

Notes to Editors

About Aon Hewitt
Aon Hewitt is the global leader in human resource solutions.  The company partners with organisations to solve their most complex benefits, talent and related financial challenges, and improve business performance.  Aon Hewitt designs, implements, communicates and administers a wide range of human capital, retirement, investment management, health care, compensation and talent management strategies.  With more than 29,000 professionals in 90 countries, Aon Hewitt makes the world a better place to work for clients and their employees.  For more information on Aon Hewitt, please visit www.aonhewitt.com.

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About Aon
Aon plc (NYSE: AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 61,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world's best broker, best insurance intermediary, reinsurance intermediary, captives manager and best employee benefits consulting firm by multiple industry sources. Visit www.aon.com for more information on Aon and www.aon.com/manchesterunited to learn about Aon's global partnership and shirt sponsorship with Manchester United.