There was a distinctly mixed market reaction to the pre-Brexit Budget yesterday, presented by Chancellor Philip Hammond.
The blue-chip was 0.16% higher at 7,037.37 in morning trading, but sterling was under pressure.
The pound lost 0.18% against the dollar, at 1.2772. It gained 0.20% against the yen, at 144.0850 .to €1.1232 and 0.21% against the
On the stock market, the FTSE 250 Index, which is more reflective of domestic British business than the FTSE 100, was down 0.05% at 18,558.33.
Share prices have been under intense pressure across the world in recent days, and currency volatility has accompanied trade tensions and stresses within the eurozone, so the Budget and the allied issue of Brexit are unlikely to have been the sole cause of the downbeat mood in financial markets.
Mr Hammond told MPs: “We are at a pivotal moment in our EU negotiations, and the stakes could not be higher. Get it right, and we will not only protect Britain’s jobs, businesses and prosperity, but we will also harvest a double ‘Deal Dividend’. A boost from the end of uncertainty, and a boost from releasing some of the fiscal headroom that I am holding in reserve at the moment.”
He went: “We are confident that we will secure a deal which delivers that dividend. Confident, but not complacent.”
Mr Hammond said he had added £2 billion to the £2.2 billion allocated to individual government departments for Brexit preparations and that he was retaining fiscal firepower to intervene “if the economy needs more support in the coming months.”
The Chancellor said: “If the economic or fiscal outlook changes materially in-year, I will take whatever action is appropriate, including if necessary reserving the right to upgrade the Spring Statement to a full fiscal event.”
Well-received Budgets can fall apart later
In other words, there will be an emergency Budget next year if Britain is about to leave the European Union without a deal. The clear implication was that such a Budget would take back some of the give-aways announced yesterday in order to batten down the hatches for what lies ahead.
Aside from the Brexit issue, some of today’s market wariness may arise from a sense of recent British history, in that it is a reasonable rule that a Budget that is cheered on the day tends to come apart a few days later when all the details in the so-called Red Book are scrutinised and unwelcome measures uncovered.