And finally, here’s Capital Economics’s take on the day:

Today’s UK budget announcement has proven the non-event that newly-minted Chancellor Healey had signalled in advance. While his first budget is hardly inspiring, it contrasts favourably with the initial efforts of some of his recent predecessors.

By sticking to a gradual fiscal tightening path, and to the expectations set over the past couple of months for a muddle-through budget, Healey has probably done enough to keep the Gilt market on side for now.

We think that Gilt yields will fall over the coming year as the UK’s fiscal risk premium remains contained and the Bank of England policy takes a less hawkish path than money markets discount.

Rolls-Royce is one of the corporate winners from the budget, with funding for its effort to develop a jet engine for single-aisle passenger planes.

John Healey said the government planned a multi-decade co-operation agreement with the FTSE 100 manufacturer, although the actual size of any support will be subject to future negotiations. The government said the jointly funded programme could be worth £2.5bn over 10 years.

Rolls-Royce makes engines for the twin-aisle planes that are mainly used for long haul travel, but it has been eyeing a return to the much larger market for single-aisle planes as Airbus and Boeing consider their next generation of aircraft.

The manufacturer’s chief executive, Tufan Erginbilgic, has touted single-aisle jet engines as one of the largest opportunities for UK economic growth, although there is no guarantee that the company will be chosen by the planemakers.

Prime minister Andy Burnham said the agreement was an example of the Labour party’s policy of reindustrialising Britain.

Some people have questioned why Rolls-Royce, whose profits have soared in recent years under Erginbilgic, requires government funding for the effort. Erginbilgic has argued that competitors will receive similar support, and any taxpayer funding would be repaid several times over if the programme is successful.

Shares in housebuilders have sold off this afternoon, despite John Healey announcing a first-time buyer ISA, along with the eagerly-awaited details of the new Your First Home scheme, also targeted at helping people buy their first home.

The chancellor also unveiled an additional £1.5bn grant for the construction of 10,000 new social rented homes, taking the social and affordable homes programme to just over £40bn over the next decade. But, analysts said the £4.7bn Your First Home initiative is less generous than expected.

Barratt Redrow is the biggest faller on the FTSE 100 index, down 5.6%, while on the FTSE 250, fellow builders Taylor Wimpey, Persimmon, Bellway and Vistry Group are among the biggest losers, down between 4% and 6.6%. Builders merchant Travis Perkins and property website Rightmove are also among the top fallers.

James Bailey, housing leader at PwC UK, said the new YFH scheme (which the housebuilders had been clamouring for) is “more modest than Help to Buy but should support first-time buyers and housebuilders. Price caps outside London based on local authority median prices appear reasonable, although early certainty on how they are determined will be important”.

“Stability in building regulations and the removal of brownfield biodiversity requirements should help, although their impact will vary and wider regulatory, tax and levy pressures remain unaddressed.”

Victoria Scholar, head of investment at interactive investor, told us:

“There is some profit taking in the housebuilder sector today after a lot of anticipation about supportive measures in the lead up to the budget.

“Plus there is a negative read across from some of the OBR’s forecasts for the housebuilders. Firstly, the cyclical sector is sensitive to the OBR’s 2027 GDP forecast downgrade. And the OBR highlighted mortgage affordability concerns too, with the expectation that households will pay more on mortgages as a percentage of disposable income ahead.

“Another factor is that the Your First Home programme’s funding seems to be less generous than the Help to Buy scheme.”

A profit warning from the construction products distributor BRCK this morning (formerly known as Brickability Group) sent its shares plunging by 12%.

Russ Mould, investment director at AJ Bell, pointed to BRCK’s profit warning this morning (slower recovery than hoped) and how the First Time Buyer ISA and YFH scheme had been well trailered - “buy on the rumour, sell on the fact, maybe”.

Daniel Coatsworth, head of markets at AJ Bell, added:

“Investors are disappointed that the Your First Home scheme doesn’t kick into force until next April. There is also the fact that the OBR has increased its inflation expectations for 2027. That’s had a knock-on impact for interest rate expectations. Data from the LSE shows the market is pricing a greater chance that UK interest rates will hit 5% by December 2027. That’s a major headwind for housebuilders as more people might find they cannot afford a mortgage.”

JP Morgan is due to charge ahead with its £3bn new UK HQ despite the government hiking bank taxes in today’s budget, according to a source familiar with the matter.

The future of the 279,000 sq metres (3 million sq ft) tower in London’s Canary Wharf had been thrown into question earlier this year, after boss Jamie Dimon said he could consider scrapping it if Britain became “hostile” to banks.

However, a source familiar with JP Morgan’s decision making told the Guardian on Wednesday that while the bank was unhappy with chancellor John Healey’s decision to hike the bank surcharge from 3% to 6%, it would not derail plans for the HQ, which is due to house half of its 23,000 UK staff.

They added that while the tax hike was frustrating, JP Morgan was still on track to lodge a planning application for the £3bn tower in the “next few months.”

JP Morgan is keen to have its disappointment known, with a spokesperson for saying that targeting one of the UK’s most lucrative sectors “lacks principle”:

“We are committed to the country, and we recognise the cost of living challenges there and the global economic headwinds that it faces, but to single out this industry for additional taxes again, one of the UK’s biggest generators of growth and jobs, lacks principle.

“It also overlooks that the banking industry operates in a highly competitive global marketplace.”

Traders gathered across London on Wednesday, watching the markets as John Healey delivers his first budget. Thousands of screens in the City were broadcasting live from Westminster, while walls of monitors track every movement in stocks and bonds.

But at Saxo UK, the Danish bank hosting the Guardian for the announcement, the mood is strikingly calm. Unlike certain other budgets in recent memory, this one has little to unsettle the trading floor.

Even as announcements trickled out before the chancellor stood up – including a rise in the minimum wage and another fuel duty freeze – there is already a sense that the bond market is in safe and welcomingly boring hands.

“It was a boring budget” says Andrew Bresler, chief executive of Saxo UK.

“They have been able to achieve what they set out to which is effectively no movement in financial markets.”

Healey’s announcement is so unsurprising, in fact, that traders trickle out to lunch before the chancellor even sits down. But this is what bond markets crave – zero drama, strict fiscal discipline and no big surprises. And Healey appeared to have delivered this on Wednesday, with a statistics-rich speech that seemed to be largely targeted at economists, investors and MPs.

The yield on the benchmark 10-year bond – a measure of the cost of government borrowing – fell slightly by 2 basis points to (0.02 percentage points) to 5.3225% – a sign that markets do not think that lending to the UK has become more risky.

“A nothing burger” said Neil Wilson, an investor strategist at the bank. “The market is not really reacting to it.

Most of Healey’s announcements were widely expected, including a higher tax on bank profits, with the chancellor insisting that he celebrated and was grateful for the role that the financial institutions played – enough to trigger some chuckles on the trading floor.

But the bond market’s focus was on how much fiscal headroom the chancellor chose to maintain (£15bn, down from £23.6bn).

And the government’s economic forecasts looked credible – even perhaps too pessimistic, Wilson said.

The figures suggested that borrowing will be higher than forecast back in March – with estimates of debt to stand at 4.2% of GDP in 2026-27, compared with 3.6% forecast in the spring statement. Meanwhile the economy is expected to grow by 1.2% this year, compared with previous estimates of 1.1%.

“This looks pessimistic to me, given how resilient the UK economy has been this year,” he said.

Traders are already looking forward to the next 2027 budget. Christian Højbjerg, a sales trader at the bank, said Healey had simply “kicked the can down the road” by not including any big fiscal measures.

Wilson added that it could add further pressure on the Labour government to call an early election next year.

“You can’t keep doing this,” he said. “Burnham has not been tested yet – there has not been an effort to cut spending like Starmer had straight away,” he said.

“We are yet to see him come up against a genuine policy yet and he can’t keep doing nothing – he can’t keep focusing on small fixes forever. So the test comes when he tries to tackle it and does something big.”

Healey’s bank tax hike has appeased investors, sparking a jump in bank stocks, but is “still a punch in the face”, industry sources have warned.

Ultimately, the hike was “better than feared” , according to a source from one industry lobby group, with lenders having steeled themselves for the bank surcharge on profits returning to pre-2023 levels of 8%.

Instead, it will rise from 3% to 6% in January, and only for a “temporary” period of 15 months.

That’s buoyed bank stocks, which are benefiting from a bit of a relief rally (see earlier post).

However, one senior UK banking executive said:

“A less bad punch in the face is still a punch in the face. The chancellor has established a very troubling precedent. [It] sends a terrible long term signal that governments will come back and do this again and again. [It’s] affordable yes, but hugely damaging in the long run.”

Questions are, however, being raised about what might happen after 15 months, particularly whether the ‘temporary’ rise in the bank surcharge from 3% to 6% will indeed fall away, or whether it will just be put under review and then potentially extended (as was Spain’s bank windfall tax).

John Healey promised to steer Britain through “global economic storms,” as he announced a package of measures to cut consumers’ energy bills in his first budget.

The chancellor said 20m households in council tax bands A to D would receive a £100 payment – a measure he said would cost £2.6bn. A VAT cut on electricity bills will be extended to next July, added Healey.

As widely expected, Healey cancelled fuel duty rises pencilled in by Rachel Reeves and announced he would echo her approach of shifting energy levies on to general taxation.

Earlier, Healey had announced that the gas standing charge would be abolished, perhaps as soon as next year – a move expected to cut utility bills for 60% of households, with the costs met by heavier users.

Healey blamed the ongoing war in the Middle East for the deterioration in the economic outlook since Reeves’s spring statement, but insisted he would keep Labour’s deficit-reduction plans on track.

“Analysts like to speak of economic headwinds, but what we face today are global economic storms,” he said, describing his statement as “a budget built on fiscal discipline, which matches immediate action today with clear direction for the future.”

The budget statement will begin in under half an hour, at 12.30pm.

We’re liveblogging it all in the Politics Liveblog – do click through to keep up with the latest developments:

This relief rally on bank stocks is not a full surprise, our banking correspondent Kalyeena Makortoff explains.

Earlier this month, it was suggested that a limited rise rise in the bank surcharge - to just 6%, rather than a full reversal of Tory-era cuts back up to 8% - would actually spark a rise in bank shares.

The FT said in a story regarding Tory leader Kemi Badenoch’s speech in Edinburgh earlier this month:

One major investor said there was an understanding in the City that higher bank taxes were now “highly likely”. If the surcharge on profits increased by no more than 3 percentage points, bank shares would rally, the investor said.

Analysts also started to put together estimates around that scenario too.

In a research note, UBS analyst Jason Napier and his team forecast the potential cost of a scenario where the surcharge was hiked from 3% to 6%, saying it would raise at least £763m per year from the four big banks alone:

Newsflash: Bloomberg are reporting that John Healey will increase bank taxes (as the Guardian reported earlier this month), but it will be temporary and come in at less than 8% – less than campaigners had hoped.

That would mean that the chancellor is not fully reversing the cut to the bank surcharge made by Jeremy Hunt in 2023.

Reminder: This surcharge is applied to bank profits on top of corporation tax. Hunt lowered the surcharge from 8% to 3% to compensate for a rise in corporation tax.

Bloomberg say:

The UK is set to hike bank taxes less steeply than feared, as Chancellor of the Exchequer John Healey seeks to balance the competitiveness of the City with the need to raise funds for voter giveaways in his first budget.

Healey will increase the bank surcharge at the budget — currently levied at 3% on top of the 25% corporation tax rate — but won’t return it to the previous 8% level it had stood at until 2023, according to people familiar with the matter.

The measure will be temporary not permanent, the people said, asking not to be named discussing the contents of the budget.

Banks shares are rallying in response. Natwest (+2.4%), Lloyds Banking Group (+2.4%) and Barclays (+2.3%) are now among the top risers on the FTSE 100 this morning.

If this is correct, then it is likely to disappoint campaigners for higher bank taxes, who have argued that bank profts have been unfairly pumped up by the jump in interest rates after the Ukraine and Iran wars pushed up the oil price.

The TUC had suggested that a 16% bank surcharge would raise £24bn over four years, while a 35% bank surcharge (matching the windfall tax on energy companies) would raise £60bn over four year.

The rabbit (hoiked proudly out of the chancellor’s hat) has traditionally been the budget animal. But this year, bunnies may be out and puffins (well, PuFins, really) are in.

These PuFins (Public Financial Institutions) are the National Wealth Fund and the British Business Bank, who are expected to get an extra £20bn from the chancellor.

PuFins invest in private sector assets, and aim to earn a return that matches or beats the government’s cost of borrowing. The assets they buy can be offset against the additional borrowing that funds them, meaning they don’t add to the national debt, under the PSNFL measure embraced by Rachel Reeves.

But, the government will still be borrowing more from the financial markets to fund the PuFins, and gilt investors won’t be fooled – even if it is neutral when assessed against the fiscal rule.

There’s also an argument that the PuFins need a regulator, as my colleague Nils Pratley explains here:

My colleague Andrew Sparrow is live-blogging all the budget action today from Westminster, as excitement builds ahead of 12.30pm.

He sets the scene….

When Andy Burnham became PM, he signalled that he wanted to end 40 years of neoliberalism. Judging by all the briefing about what will be in the budget today, neoliberalism is probably safe for another year or so because Burnham and his chancellor, John Healey, have decided not to use this as a moment for big, transformative change, but to instead opt for a more low-risk, every-little-bit-helps fiscal statement.

There are radical elements in the Burnham agenda, but mostly they will have to wait for another day.

Here’s Andrew’s live-blog, which I’ll be peeling off to help with later….

There’ll be a lot of talk about fiscal headroom today, especially if the chancellor surprises the City by not maintaining as much headroom as expected.

This relates to the UK’s two fiscal rules.

1. The Stability Rule. That day-to-day public spending must be fully covered by tax revenues, meaning the current budget should be in balance or surplus in three year’s time.

2. The Investment Rule. That public sector net financial liabilities (PSNFL), a broad measure of the national debt that includes financial assets, is falling in three year’s time.

Back in March, the Office for Budget Responsibility estimated the UK would hit the stability rule with headroom of £23.6bn.

The investment rule was on track too - PSNFL was predicted to be falling by 0.8% of GDP (equivalent to £27 billion) in 2029-30.

Economists predict both headroom measures would have shrunk since March, due to the jump in borrowing costs caused by the Iran war. So John Healey has to choose between trying to rebuild them - through tax rises or spending cuts - or accepting a smaller headroom.

The risk with a smaller headroom is that further economic shocks could wipe it out - leading to endless speculation about what measures might be needed to bring the rules back into line.

City experts are welcoming reports that chancellor John Healey will scrap plans to slash the annual cash Isa allowance from £20,000 to £12,000 a year.

According to the Financial Times, Healey had concluded that this is the wrong way to persuade people to invest more in stocks and shares.

The move had been announced by Healey’s predecessor, Rachel Reeves, in an attempt to encourage people to invest in UK companies.

It would have meant that from 6 April 2027, anyone under 65 would only have been allowed to save up to £12,000 in a cash ISA. Anything above that will have to move into a stocks and shares Isa.

Tom Selby, director of public policy at AJ Bell, has cheered the move, and criticised Reeves’s “calamitous reform agenda”, saying:

“Rachel Reeves’ ISA reforms were a car crash, lamented by most of the retail investment industry, who criticised the complexity they would add for little consumer benefit, and building societies, who warned they would increase mortgage costs. Given the Prime Minister’s main focus is on easing cost-of-living pressures, we shouldn’t be surprised the Cash ISA cut is set to be unceremoniously ditched.

“While the central aim of encouraging more people to invest for the long-term was the right one, the route Healey’s predecessor chose to achieve this was painfully convoluted, hardening the border between short-term saving and long-term investing and adding overwhelming complexity – not to mention a tax charge – into the system in the process.

Jo Harris, chief customer and operations officer at Quilter, points out that u-turns have costs:

“There is also a lesson here about how policy is made. The industry has already spent an inordinate amount of time and resource preparing its systems, products and customer communications for these changes.

That is time that could have been spent innovating and improving outcomes for customers. Policy inevitably changes, but announcing complex reforms and asking firms to prepare for them only to reverse course before they take effect is the worst kind of policymaking.”

Abolishing standing charges on gas is also attractive to the Treasury, because it won’t cost them anything!

UK research and charity foundation Nesta recently published a very handy case for abolishing the gas standing charge – which included five reasons why it would be an “an impactful policy change”:

• It reduces bills for a majority of people

• It is progressive: poorer households will save more than wealthier ones

• It supports electrification by reducing the electricity-to-gas price ratio

• It should be popular, because people view standing charges as unfair

• It costs the Treasury nothing

They also explain that “every home pays the same standing charge, but the amount of gas used varies a lot, and is skewed by a small number of households with outsized consumption.”

• The median dual fuel household uses 9,700 kWh of gas per year, but the average is 11,900 kWh.

• The top five percent use over 25,000 kWh annually, which jumps up to over 42,000 kWh for the top one percent.

Abolishing the standing charge doesn’t mean that every gas user will save money.

Because the cost is shifting onto the unit rate of gas, a household that consumes a lot of gas might end up paying more overall.

Currently, regulator Ofgem has capped gas bills at 7.97 pence per kWh, plus the 29.68p daily standing charge.

Consumer advice website MoneySavingExpert has estimated that today’s move could add around 1p to each kWh of gas used.

Based on their estimations, using current energy prices, this would see the typical gas unit rate rise from 7.97p/kWh to 9.11p/kWh, they say here.

The Treasury argues that households who don’t benefit from an automatic saving will still have better control over their bills without the worry of affording the standing charge.

It aso says the government will set out “targeted mitigation for a small number of households” in the future.

John Healey has pledged to provide households with “breathing space” from the rising cost of living pressures.

And the Treasury has just announced a new measure to help – the government is removing standing charges from household gas bills in Great Britain.

These fixed daily fees – £108 a year for the typical household on average – cover the costs of connecting to a supply. They are controversial as households pay them even if they only use little energy

Healey will ask regulator Ofgem to end this “unfair and outdated practice” in 2027, or as soon as possible afterwards.

The plan is to shift the cost of standing charges into the unit rate of energy instead.

The Treasury says this could save 60% of account-holding households around an average of £45 off their annual bill.

Healey says:

“Gas standing charges are unfair and outdated so I am scrapping them to give millions of households a bit of breathing space.

“My Budget will draw a line in the sand on an energy policy that has failed British billpayers for years, letting extra costs on bills pile high and leaving households even more exposed to global shocks.”

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

It’s budget day! And City investors are expecting that chancellor John Healey avoids any bold spending pledges or tax hikes in his first fiscal statement.

Investors anticipate a cautious budget from the chancellor, reasoning that he will prioritise stability in the bond market at a time when borrowing costs are close to their highest levels in around two decades.

With memories of Liz Truss’s budget disaster yet to fade in the City, traders will be alert to any signs that Healey is wavering on the government’s fiscal rules - but the mood music from the Treasury is that fiscal stability is still in vogue.

Last night, the chancellor warned that the world is “a highly uncertain place.”

In a video released before the budget, he said:

“Conflicts abroad are pushing up energy prices, and the cost of living here at home – piling pressure on the families, on businesses and on our public finances.”

One key question for the City is how much fiscal headroom the chancellor has chosen to maintain. That buffer - which measures the safety margin the government enjoys to hit its fiscal rules - will have shrunk as UK borrowing costs rose this year. Back in March, the headroom was a comfy £23.6bn.

Economists predict it will have fallen to between £15bn and £20bn - a figure below £15bn might spook the City.

Morgan Stanley reported on Tuesday that investors they’ve spoken to largely expect a low-key, low-volatility event today.

They told clients:

“No investor we spoke to contemplated a risk of the fiscal headroom coming in at below £15 billion, and most we spoke to said that even £15 billion (our base case) would be a disappointment, with consensus in recent days shifting towards between £15 billion and £20 billion.”

Bank stocks could be hit by the budget too - we’re expecting new taxes on the banks, but we don’t yet know if Healey will simply reverse the Tory-era cut to the bank surcharge, or raise it by more.

The agenda

• 12.30pm GMT: The budget statement begins

• 1.30pm GMT: Office for Budget Responsibility releases its latest economic and fiscal outlook

• 2.30pm GMT: Office for Budget Responsibility press conference