Investing.com -- London shares erased earlier losses to finish slightly higher on Wednesday, while sterling rebounded from near two-week lows after Chancellor John Healey unveiled his first budget, confirming a narrower £15 billion fiscal headroom buffer and trimmed 2027 growth projections without triggering fresh bond market turbulence.
The blue-chip FTSE 100 recovered from a 0.4% morning deficit to close up 0.1%. In currency bourses, sterling held off multi-week lows, trading flat at $1.3308 against the dollar as market participants welcomed the absence of unfunded borrowing expansions.
OBR lifts 2026 growth, trims 2027
Economic projections compiled by the Office for Budget Responsibility (OBR) delivered a mixed picture, balancing near-term momentum against elevated energy costs:
Gross domestic product is now projected to expand by 1.2% in 2026, up slightly from the 1.1% forecast in March. However, the OBR lowered its 2027 growth projection to 1% from 1.6%, citing the macroeconomic drag of higher global oil and gas prices linked to the conflict involving Iran.
Medium-term expansion is forecast to re-accelerate to 1.6% in 2028, 1.8% in 2029, 1.7% in 2030, and 1.6% in 2031, compared with earlier estimates of 1.6% in 2028 and 1.5% in 2029–2030.
Fiscal buffer shrinks to £15 billion as debt servicing costs rise
The OBR estimated the government's fiscal headroom - the margin by which tax revenues exceed day-to-day spending - at £15 billion ($20 billion) for the 2029/30 fiscal year.
This marks a sharp decline from the £24 billion buffer projected in March, matching dealer expectations in a recent Reuters poll as higher gilt yields inflated sovereign debt servicing costs. Healey affirmed that the government would meet its fiscal mandate to balance day-to-day spending with receipts by the end of the decade.
By preserving just £15 billion of headroom through 2030, Chancellor John Healey dodged a direct confrontation with the gilt market, but left zero cushion for error.
With energy shocks already shaving 2027 growth to 1% and the Bank of England constrained by sticky inflation, the Treasury is effectively betting that borrowing costs drop before another global disruption hits.
UK round up
Standard Charteredraised its full-year income growth and return targets after third-quarter pretax profit jumped 27% to $2.25 billion, beating estimates on strong wealth management and trading income.
Huntingcut its 2026 core profit forecast for the second time this year, citing Middle East conflict, attacks in Saudi Arabia and a weaker short-term trading outlook.
(Navamya A contributed reporting)
Original Article
London's FTSE edges up, sterling steadies as Healey unveils UK Budget
Wall Street shows little reaction amid small moves after Fed holds rates steady
Cerebras Systems drops 4% following Culper Research short report
