New UK finance minister unveils 'steady as you go' budget
NWG•British finance minister John Healey announced a cautious budget, with £15 billion of fiscal headroom, down from £23.6 billion in March. Bank shares rose 3.3% to 3.6% after the tax increase on their profits was smaller than feared.
1. Budget and markets
Healey announced support measures for households and businesses while seeking to avoid adding pressure from the bond market. Fiscal headroom stood at £15 billion, in line with expectations from a poll, but below the £23.6 billion recorded in March.
2. Mixed market moves
UK government bond yields edged lower, with the 10-year yield down 2 basis points to 5.323% and the 30-year yield down 3 basis points to 5.711%. Sterling fell 0.1% to $1.3298, while the FTSE 100 rose 0.1% and the domestically focused FTSE 250 gained 0.4%. Lloyds, Barclays and NatWest shares rose between 3.3% and 3.6% after the bank-profit tax increase was smaller than feared.
3. Analysts on the outlook
Market commentators described the budget as cautious and largely in line with expectations, while noting that decisions on areas including defence spending and welfare reforms were deferred. One analyst cited a reduction in next year's growth forecast from 1.6% to 1% and a £20.4 billion investment programme.
