Chancellor John Healey’s first Budget has emerged as the defining UK business and finance story of 29 October, combining targeted household support with higher taxes on banks and a fresh push to direct public capital towards strategic industries.

The package was broadly judged to have met market expectations, helping the FTSE 100 open higher and supporting sterling. However, official forecasts pointed to a weaker growth outlook beyond this year and inflation remaining above the Bank of England’s target for longer.

A cautious Budget with limited room for manoeuvre

Healey raised the bank corporation-tax surcharge from 3% to 6% for 15 months. The increase was smaller than some investors had feared and was expected to raise about £1.5bn, easing the immediate reaction in bank shares and financial markets.

The Office for Budget Responsibility increased its forecast for UK growth in 2026 to 1.2%, but cut its projection for 2027 to 1%. It also estimated that the government would retain roughly £15bn of headroom against its fiscal rules in 2029–30.

The fiscal outlook remains constrained by higher borrowing costs, elevated debt repayments and a more difficult international environment. The OBR identified rising energy prices as a major near-term risk, with inflation expected to stay above the Bank of England’s 2% target until 2028.

Support for households and businesses

The Budget included measures intended to reduce pressure on household finances, including energy-bill relief and assistance with fuel costs. The government also announced tariff suspensions on more than 100 supermarket goods, alongside a 3.9% increase in the minimum wage.

Small businesses were offered some property-tax relief, while online marketplaces such as Amazon and eBay face tighter value-added-tax rules. Healey also announced higher taxes on gambling, savers and landlords to help fund the package.

For companies planning investment, the most significant measure was an additional £20.4bn for the National Wealth Fund and the British Business Bank. The money is intended to support investment in artificial intelligence, defence and green energy over the coming years.

Markets focus on growth and inflation

FTSE 100 futures indicated an opening gain of about 0.3% after the index closed at 10,695 on Wednesday. Sterling also strengthened modestly as investors concluded that the Budget preserved fiscal discipline while avoiding a larger-than-expected rise in bank taxation.

That initial market relief is tempered by the weaker medium-term growth forecast. Higher inflation could keep interest rates elevated, increasing financing costs for households and companies and placing pressure on consumer-facing businesses already dealing with cautious spending.

The next test will come from domestic credit, mortgage and inflation data. Investors will be watching whether households continue to borrow at current rates, whether housing activity recovers and whether price pressures begin to ease sufficiently for the Bank of England to consider lower rates.

Business implications

The Budget’s central message is one of selective state support rather than a broad fiscal expansion. Banks, landlords, gambling companies and online marketplaces face additional costs, while businesses linked to infrastructure, technology, defence and the energy transition stand to benefit from increased public financing.

For the wider economy, the policy mix offers near-term protection against higher living costs but leaves businesses navigating slower growth and an uncertain interest-rate outlook. The Budget therefore provides some stability for markets without removing the broader pressures weighing on UK investment and consumer demand.