The FTSE 100 has fallen in early trading as investors brace for Rachel Reeves’ tax-raising Budget.
UK stocks dropped as the Chancellor prepares to announce £40bn of measures designed to shore up the public finances.
The FTSE 100 was down 0.5pc to 8,176.05 at the open while the midcap FTSE 250 fell 0.2pc to 20,574.69.
Rachel Reeves has been urged by bosses to take the “opportunity to boost confidence” after uncertainty about tax rises meant growth ground to a halt in the lead up to the Budget.
Private sector activity fell by 4pc in the three months to October, according to the CBI’s latest growth indicator, amid concerns about potential increases in National Insurance contributions for employers, which is among a host of potential tax rises expected in the Chancellor’s speech.
Bond markets rallied at the start of the day, sending the cost of government borrowing lower.
But Peder Beck-Friis, chief economist at bond trader Pimco, said traders have built in a “risk premium” on UK debt ahead of the Budget.
The yield on 10-year UK gilts – the return the government promises to pay buyers of its debt – has risen from 3.76pc in mid-September to 4.31pc on Tuesday, which was its highest closing level since June.
Deutsche Bank analyst Jim Reid said the main focus today “will be on how much additional borrowing there is, particularly given it was just over two years ago that the mini-budget under Liz Truss sent UK markets into turmoil”.
He added: “In terms of what to expect, an important focus will be on the new fiscal rules, and Chancellor Rachel Reeves has confirmed that the Government is planning to change the way it measures debt in order to fund extra investment.”
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