The London stock market, shaken by Japan's nuclear crisis and the prospect of UN-backed military strikes in Libya, will switch focus next week to the British government's annual budget. London's FTSE 100 index fell 1.9 percent over the past week to finish at 5,718.13 points on Friday.
The FTSE had dived by 2.7 percent the previous week as investors fretted over the impact of Japan's devastating earthquake and tsunami which struck on March 11. Next Wednesday, Britain's coalition government will launch its annual taxation and spending plans for 2011/2012, and will also issue the latest official forecasts for UK economic growth and state borrowing.
The Conservative-Liberal Democrat coalition, which rose to power in May 2010, has sought to slash public spending and hike taxes in order to bring down a record deficit that was inherited from the previous Labour administration.
Finance minister George Osborne, a Conservative, is due to unveil his annual budget statement before parliament at 1230 GMT on Wednesday.
Ahead of the crucial budget speech, Osborne has been comforted this week by supportive comments from the Paris-based Organisation for Economic Co-operation and Development.
The OECD praised the coalition's bid to cut the nation's huge deficit but said "recovery and job creation would both benefit from smaller-than-planned cuts in public investment." At the same time, the OECD lowered its UK economic growth forecast to 1.5 percent this year, down from a previous estimate of 1.7 percent. Under the most recent predictions, the government forecasts gross domestic product (GDP) growth of 2.1 percent this year and 2.6 percent in 2012.