FTSE (^FTSE) investors remained cautious as chancellor Rachel Reeves officially voiced her support for a third runway at Heathrow Airport, as she put infrastructure investment as the cornerstone of her strategy to stimulate growth across the UK.
London's benchmark index was basically unchanged, up by 0.3% after the chancellor revealed her plans.
Neil Birrell, chief investment officer and lead fund manager at Premier Miton Diversified fund range, Premier Miton Investors, said: "The measures announced by the chancellor are unlikely to kickstart economic growth, however, they may well provide growth for the longer term that subsequent governments will reap rewards from.
"The investment outlined is for the long term, not the short term. Short term stimulus and immediate wealth generation, which the economy could do with, comes from looser fiscal policy and business conditions, furthermore, sentiment needs to be bolstered, which this speech might help.
"The loosening of bureaucracy and pension fund rules are a positive, but we really could do with clear support for UK capital markets, they are vital for a well-functioning, growing economy."
UK borrowing costs remained steady after the announcement. Yields on UK bonds, known as gilts, jumped to their highest levels in decades earlier this month before cooling nearly as fast.
George Vessey, lead FX strategist at Convera, said the chancellor’s speech was a "damp squib" for markets. He said: "Markets seem unenthusiastic about the latest UK growth plans, showing little to no reaction in either gilts or sterling."
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Lindsay James, investment strategist at Quilter Investors, said: "Today’s speech has also seen the re-emergence of plans to expand various UK airports, including Heathrow. It is debatable whether these airport developments are the right short-term target for growth and solving the UK's productivity puzzle, and it is likely to spark strong opposition.
"Instead, the focus should be on upskilling the labour market and improving labour mobility through both the tax system and planning measures."
In a speech in Oxfordshire, the chancellor said economic growth "will not come without a fight" as she unveiled plans aimed at revitalising the nation's flagging economy. Central to these proposals is the “badly needed” expansion of Heathrow, which, according to the chancellor, would create “over 100,000 jobs.”
"I can confirm today that this government supports a third runway at Heathrow and is inviting proposals to be brought forward by the summer," she said.
"We will then take forward a full assessment through the airport national policy statement.
"This will ensure that the project is value for money and our clear expectation is that any associated service transport costs will be financed through private funding.”
Several campaigners, including within her Labour party, have opposed a third runway for decades because of environmental concerns.
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Sadiq Khan, the mayor of London, made clear he "remains opposed" to a third runway, moments after Reeves’ announcement.
He said he would "scrutinise carefully any new proposals that now come forward from Heathrow, including the impact it will have on people living in the area and the huge knock-on effects for our transport infrastructure".
Reeves has assured that Heathrow’s expansion will meet strict rules on noise, air quality and carbon emissions.
In addition to Heathrow, the government plans to collaborate with Doncaster Council on reopening an airport in South Yorkshire and constructing a new logistics and manufacturing park at East Midlands Airport.
Reeves also announced that the government would be easing environmental requirements for developers, allowing them to contribute to a “nature restoration fund” instead. This, she explained, would free businesses from “worrying about the bats and the newts” and encourage more construction. “Taking the right decisions does not always mean taking the easy decisions,” she added.
As part of her broader agenda, the chancellor outlined a "new approach" to planning applications for stations, advocating for a default response of "yes" to development proposals. She also reiterated the government's commitment to working alongside devolved administrations, including partnerships on industrial strategy.
She added that the government will review the ‘Green Book’ – the Treasury's guidelines for evaluating large investment projects – to ensure that regions outside London have access to the same resources. "This means investment in all regions is given a fair hearing by the Treasury," she said.
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The government is also set to ramp up collaboration with the private sector, with plans to deliver projects such as the Lower Thames Crossing and rail expansions across northern England.
Over the next five years, Reeves added, Britain would invest 2.6% of GDP on average, compared to 1.9% planned by the previous government.
This will deliver an additional £100bn of growth enhancing capital spending, Reeves said, which will catalyse private sector investment in housing, transport links and clean energy.
Reeves also expressed her support for plans put forward by Manchester mayor Andy Burnham to redevelop Old Trafford.
She said the plans promise to create "new housing and commercial development around a new stadium". This, the chancellor added, will "drive regeneration and growth in the area".
On the broader investment front, Reeves made clear her ambition to make the UK "the best place in the world to invest," a vision she argued would require decisive action.
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As part of this push, the chancellor announced a £65m investment in Connected Kerb, aimed at expanding the electric vehicle charging network across the UK. She also revealed a £28m equity investment in Cornish Metals (CUSN.L), a company providing raw materials critical for solar panels, wind turbines, and electric vehicles.
"There is no trade-off between economic growth and net-zero," Reeves said.
The government is also setting “ambitious” goals in its reset of relations with the European Union, Reeves has said, framing the overhaul of Britain’s ties with its nearest and largest trading partner as key to driving economic growth and supporting businesses.
She said that reforming the UK-EU relationship is in the national interest, noticing challenges inherited from the previous government's dealings with Brussels.
“We will prioritise proposals that are consistent with our manifesto commitments and contribute to British growth and prosperity,” Reeves said.
While Labour seeks to improve EU relations, it has ruled out joining the single market, a customs union, or a return to free movement.
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