UK stocks fall as gilt yields surge on reports of Reeves’ tax plan reversal

LONDON: UK stocks slipped on Friday as gilt yields jumped on reports the British government had scrapped plans to increase income tax in its upcoming budget, though markets still secured modest weekly gains.

The blue-chip FTSE 100 fell 1.1 percent, marking its steepest one-day decline since April 9, when global markets reeled from US President Donald Trump’s tariff announcements. Despite the pullback, it rose 0.2 percent for the week.

The domestically focused FTSE 250 dropped 0.8 percent, while still ending the week with a 0.2 percent gain.

A government source said on Friday that Finance Minister Rachel Reeves has abandoned plans to raise income tax in this month’s budget, alarming investors who had anticipated increases to address the expected fiscal shortfall.

Markets sold off sharply after the Financial Times first reported the news, and only partially recovered after other outlets, including Reuters, cited sources saying improved fiscal forecasts influenced the decision.

The 10-year government bond, or gilt, yield was set for its biggest one-day jump since July, while sterling declined 0.3 percent.

Losses in equities were broad-based, led by heavyweight banking stocks with a 2.2 percent drop.

Precious metal miners tumbled 2.4 percent as gold prices fell.