Yesterday’s Budget was, by design, uneventful. Markets barely moved, and in London, that counts as a success.
John Healey’s first statement held to the fiscal discipline set before him. He kept around £15bn of headroom, avoided large unfunded giveaways, and raised money in targeted places: a temporary rise in the bank surcharge and higher gambling duties. Gilts and sterling took it calmly. After two years in which British budgets were remembered for the wrong reasons, calm is worth a great deal.
From the Continent, the Budget looks like one half of a larger story.
The other half comes next month in Brussels. The Prime Minister has reopened the question of Britain’s relationship with Europe and says he wants serious dialogue about long-term ties. Nobody yet knows how far that will go, and at home the subject remains as divisive as ever. But in European capitals the tone has changed. What was a closed door is now, at the very least, a conversation.
The economics have never really gone away. The EU remains Britain’s largest trading partner, accounting for nearly half of all UK trade. European investors hold close to £1 trillion of assets in Britain, and British companies hold almost £800bn across Europe. That relationship doesn't need inventing, only better plumbing.
For investors, the opportunity and the risk sit side by side. Borrowing costs are still high, a rate rise is expected next week, and any Brexit renegotiation will be slow and contested. But a country that pairs fiscal restraint with a warmer line to Europe is easier to underwrite than one that offers neither.
From conversations on both sides of the Channel, my sense is that European capital has spent the past few years watching Britain rather than backing it. A quiet Budget will not change that by itself. A steady one, followed by a constructive month in Brussels, might begin to.
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