London stocks ended mixed on Wednesday as investors assessed Chancellor John Healey’s first Autumn Budget, with the FTSE 100 edging higher despite sharp losses among housebuilders and pharmaceutical stocks, while banks and utilities benefited from a relatively calm market reaction.
The FTSE 100 closed 7.96 points higher, up 0.1%, at 10,694.50, recovering from earlier weakness as investors digested the Government’s tax and spending announcements. The FTSE 250 declined 77.11 points, or 0.3%, to 24,639.26, while the AIM All-Share advanced 0.3% to 760.92.
Chancellor John Healey described his Budget as one built on fiscal discipline, promising support for households and investment in economic growth while attempting to reassure government bond investors about the sustainability of public finances.
The Budget included higher taxes on banks and gambling companies, alongside measures aimed at reducing pressure from household energy bills and supporting investment.
Forecasts from the Office for Budget Responsibility highlighted the difficult economic environment facing the Government.
UK growth for 2026 was revised slightly higher to 1.2% from 1.1%, but the forecast for 2027 was cut to 1% from 1.5%.
Inflation is now expected to average 3.1% in 2026 and 3.4% in 2027, before returning to the Bank of England’s 2% target in 2028, approximately a year later than previously anticipated.
The Government’s fiscal headroom was estimated at £15 billion for 2029-30, down from £23.6 billion in March, before recovering to approximately £22 billion in 2030-31.
Despite the tighter financial outlook, UK government bond markets reacted calmly, with the 10-year gilt yield easing to around 5.33% from 5.34% on Tuesday.
Sterling was also largely unchanged, trading at $1.3310 against the US dollar, compared with $1.3307 at Tuesday’s London close.
Fidelity International investment director Tom Stevenson said the Budget had delivered stability, with relatively few major surprises capable of unsettling financial markets.
Deutsche Bank economist Sanjay Raja also suggested that the Chancellor had achieved his objective of avoiding unnecessary market disruption.
Banking shares performed strongly despite confirmation that the UK’s bank corporation tax surcharge will increase from 3% to 6% for 15 months.
Investors had previously feared a larger increase, potentially restoring the surcharge to its former 8% level.
NatWest gained 2%, Lloyds Banking Group rose 1.7% and Barclays advanced 1.6%, as the sector responded positively to the relatively limited tax increase.
Standard Chartered climbed 2.4% after reporting stronger third-quarter earnings and raising its financial guidance.
However, RBC Capital Markets analyst Benjamin Toms estimated that the higher banking surcharge could reduce sector profitability by as much as 4% in the 2027 financial year.
He also questioned whether the temporary tax increase would necessarily be reversed after the proposed 15-month period.
Gambling companies also advanced despite higher sector taxes, with Entain rising 3.6% and Rank Group jumping 12%.
The Budget increased machine gaming duty to 25% from 20%, but the change was less severe than some investors had feared.
JPMorgan suggested the increase provided relief compared with earlier speculation that the duty could rise as high as 40%.
Housebuilders were among the biggest losers following the Budget, despite confirmation of a support scheme aimed at helping first-time buyers.
Taylor Wimpey slumped 7.3%, Persimmon fell 6.9% and Barratt Redrow declined 6.6%, reversing gains recorded ahead of the Chancellor’s announcement.
Analysts suggested investors may have been disappointed by the scale and timing of the proposed housing support measures, particularly if meaningful benefits to new-home sales take time to materialise.
GSK also weighed on the FTSE 100, falling 4.8%, even though its third-quarter sales and earnings exceeded market forecasts.
Investors were concerned by a weaker-than-expected performance from the pharmaceutical company’s vaccines division, overshadowing stronger results elsewhere in the business.
Among mid-cap companies, Hunting plunged 9.5% after cutting its full-year earnings guidance for the second time in just over two months.
The engineering group said the prolonged Middle East conflict had disrupted trading conditions and weakened its near-term outlook.
Hunting reduced its 2026 adjusted EBITDA forecast to $128 million–$133 million, down from its previous range of $138 million–$141 million.
The company had already reduced its original guidance of $145 million–$155 million in August.
Chief Executive Jim Johnson said the conflict had affected performance during the third quarter and continued to weigh on trading into the fourth quarter, despite stronger conditions in the company’s subsea-focused operations.
European markets were subdued, with France’s CAC 40 finishing broadly unchanged while Germany’s DAX advanced 0.4%.
Wall Street was mixed around London’s close, with the Dow Jones Industrial Average gaining 0.3% and the S&P 500 advancing 0.2%, while the Nasdaq Composite slipped 0.1%.
Investor attention is now shifting towards the Federal Reserve’s interest rate decision, with markets broadly expecting US borrowing costs to remain unchanged.
However, persistent inflation above the Fed’s 2% target has raised expectations that further monetary tightening could be required before the end of 2026.
The European Central Bank is also scheduled to announce its latest policy decision on Thursday, followed by the Bank of Japan on Friday.
In commodity markets, Brent crude rose to $116.37 a barrel, compared with $114.13 on Tuesday, while gold eased to $4,039.18 an ounce.
The euro strengthened slightly to $1.1148 against the dollar, while US Treasury yields edged higher, with the 10-year yield reaching 5.03%.
Whitbread led the FTSE 100 gainers, rising to 2,737p, followed by SSE at 2,604p, Centrica at 156.20p, Standard Chartered at 2,068p and Halma at 3,446p.
The largest blue-chip fallers included Barratt Redrow, GSK, Informa, Kingfisher and J Sainsbury.
For UK investors, the Budget produced a relatively orderly market reaction, with stable gilt yields and limited currency volatility suggesting that the Chancellor avoided triggering immediate concerns over fiscal credibility.
However, the contrasting performances of banks, gambling companies and housebuilders demonstrated how individual tax and spending measures affected different sectors.
Attention will now turn to Thursday’s results from Shell and Lloyds Banking Group, trading updates from Glencore, Haleon and IMI, and the European Central Bank’s interest rate announcement, alongside fresh US inflation and employment data that could influence expectations for global monetary policy.
