The FTSE 100 pushed higher on Wednesday and gilt yields drifted lower as investors judged Rachel Reeves’ budget to be tough but not as damaging as the market had braced for.
The FTSE 100 closed up 0.9% at 9,691.58. The FTSE 250 gained 1.2% to 21,885.52 and the AIM All-Share added 0.2% to 743.26.
Reeves unveiled £26 billion in tax increases to rebuild fiscal headroom. The centrepiece was a three-year extension of the income tax threshold freeze, expected to raise £12.7 billion by 2030–31. The chancellor admitted the freeze would squeeze “working people” but argued the contribution needed to be shared.
Her statement took place after chaotic scenes in Westminster, triggered by the Office for Budget Responsibility accidentally publishing its assessment of the budget early. Reeves called the error “deeply disappointing”, while the OBR issued an apology and said an investigation was under way.
The budget also included higher taxes on dividends, savings income and property, adjustments to salary-sacrifice pensions, reforms to gambling duties and a mileage-based charge for electric vehicles. High-value homes worth over £2 million will face a new council tax surcharge. At the same time, the government pledged to cut green levies, trimming energy bills by £2.3 billion over three years.
The OBR upgraded its GDP outlook for 2025 but cut forecasts for 2026 through 2029, signalling a slower medium-term path. Ten-year gilt yields eased to 4.43% from 4.49% on Tuesday.
Banking stocks extended their gains after confirmation that the sector would not face new tax measures. Lloyds rose 3.4%, Barclays climbed 3.2% and NatWest advanced 2.3%.
Gambling stocks split in reaction to duty changes. Evoke Shares slid 18%. Entain, with broader international exposure, recovered quickly and closed 3.4% higher.
Oil and gas names were under pressure after the government confirmed the windfall tax would run until March 2030 unless prices fall sharply. Serica Energy dropped 4.1% and Harbour Energy fell 4.7%.
Wall Street offered a supportive backdrop. The Dow and S&P 500 each rose 0.8%, while the Nasdaq gained 0.9% heading into the London close.