The FTSE 100 index has plummeted to its lowest level in two months after Donald Trump announced a wave of tariffs on Tuesday.

When the index closed yesterday, the London stock market was down by more than 100 points, 1.2% to 8496. It was the sixth session in a row to fall.

British Airways owner IAG fell by the largest figure, down 6.4%, while Holiday Inn owner IHG was also down by 3.6%. Pest controller Rentokil fell by 4.5%, and industrial components groups Diploma and Spirax were down 4.4% and 3.8%, respectively.

It comes as US stocks dropped again after huge uncertainty caused by the President’s tariffs plan.

Donald Trump‘s global trade war has escalated, with a 25% levy on steel and aluminium coming into force overnight in the UK and EU.

The European Commission has vowed to impose “countermeasures”, with European Commission Ursula von der Leyen saying: “We deeply regret this measure. We are ready to engage in meaningful dialogue.”

However, Britain is keeping a “cool-head” as Exchequer Secretary to the Treasury James Murray says “the UK is in a “very different position than the EU”.

“The UK and the US have been negotiating rapidly for an economic agreement, and so we’re in a position where that negotiation is ongoing and these global tariffs, if you like, have landed in the middle of that work,” he told Sky News.

“So we don’t want to be pushed off course by this.

“We want to carry on with our rapid negotiation toward an economic agreement, because we think that’s in the best interest of British businesses and the British public.”

The FTSE 100 has, however, opened higher this morning after Donald Trump reversed his plans to double tariffs on Canada’s steel and aluminium sector.

Tuesday saw the UK’s blue-chip index drop 1.2% following the announcement to raise metal tariffs to 50% levy on his closest ally.

After Canada hit back with a retaliatory 25% electricity export tariff, the President backtracked down to his original plan of 25%. This saw the the FTSE 100 bounce back by 0.2% to 8,512.37.

The FTSE 100 has dipped in early trading as spooked investors brace for Rachel Reeves’ tax-raising Budget.

UK stocks fell as the Chancellor prepares to announce £40bn in measures aimed at stabilising public finances.

The FTSE-100 index at 8:15am was down 40.14 at 8179.47 – a drop of 0.5 percent. As of 8.50am it stood at 8,186.66.

Ms Reeves has been urged to “take the opportunity to boost confidence,” after a halt in growth due to uncertainty surrounding potential tax increases in the lead-up to the Budget.

According to the CBI’s latest growth indicator, private sector activity fell by 4% in the three months to October, reflecting concerns over potential rises in employer National Insurance contributions, just one of a number of anticipated tax increases expected in the Chancellor’s speech.

Bond markets rallied at the start of the day, pushing down government borrowing costs.

However, Peder Beck-Friis, economist at bond trader Pimco, said traders had priced 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 increased from 3.76% in mid-September to 4.31% on Tuesday, marking its highest closing level since June.

Deutsche Bank analyst Jim Reid said today’s primary focus “will be on how much additional borrowing there is, particularly as just over two years ago, the mini-budget under Liz Truss sent UK markets into turmoil.”

He added: “Key expectations include the new fiscal rules, with Chancellor Rachel Reeves confirming that the Government plans to change its approach to measuring debt to enable additional investment.”

Commitments not to increase income tax or national insurance on employees are likely to see companies hit with a greater share of the burden to help repair the nation’s finances and fund stretched public services.

Changes to borrowing rules will also allow her to pump billions into renewing the UK’s infrastructure and could fund improvements to crumbling schools, hospitals and prisons.

Posting on X this morning, Ms Reeves said: “Politics is about choices. This Labour government chooses investment over decline.”

In the Commons later today, she will tell MPs: “My belief in Britain burns brighter than ever. And the prize on offer to today is immense.

“More pounds in people’s pockets. An NHS that is there when you need it. An economy that is growing, creating wealth and opportunity for all. Because that is the only way to improve living standards.”

“And the only way to drive economic growth is to invest, invest, invest. There are no shortcuts. To deliver that investment we must restore economic stability.”

Nevertheless, business leaders are nervously awaiting the Budget announcements, with increased levels of the national minimum wage and the prospect of hikes to employers’ national insurance contributions likely to add to labour costs.

A 6.7% increase in the national living wage will see it rise to £12.21 an hour next year.

John Foster, chief policy and campaigns officer at the Confederation of British Industry (CBI), said the national living wage was a “valuable tool” for protecting the incomes of the poorest in society “but with productivity stagnant, businesses will have to accommodate this increase against a challenging economic backdrop and growing pressure on their bottom line”.

“That pressure will make it increasingly difficult for firms to find the headroom to invest in the tech and innovation needed to boost productivity and deliver sustainable increases in wages.”

The FTSE 100 slumped to its lowest level in almost three months this morning, with traders apparently rattled by Rachel Reeves’ tax and spend Budget yesterday.

The Chancellor’s package of financial measures included far-reaching changes impacting Stamp Duty, Capital Gains Tax National Insurance Contributions (NIC) for employers and Inheritance Tax, among other key areas.

Ms Reeves has attempted to justify her approach by saying drastic measures were necessary to plug a £22billion financial black hole she claims she was left by the Tories.

However, the FTSE, THE United Kingdom’s best-known stock market index, appears to be unconvinced, and after an immediate dip yesterday, it fell by 52.9 points shortly after trading got underway this morning, at one point dropping to 8.106.73 – the lowest it has been since August 8.

Speaking to the BBC this morning, Ms Reeves admitted: “This is not the sort of Budget we would want to repeat.”

“But this is the Budget that is needed to wipe the slate clean and to put our public finances on a firm trajectory.”

Paul Johnson, director of the IFS, fears she may need to raise taxes again in a few years if extra borrowing in the Budget does not lead to increased growth.

He added: “The first gamble is that a big cash injection for public services over the next two years will be enough to turn performance around, and that many of the temporary spending pressures won’t persist.

“If she’s wrong about that, and spending pressures don’t dissipate after two years, then to avoid cutting unprotected areas she may well need to come back with another round of tax rises in a couple of years’ time – unless she gets lucky on growth.”

Higher rates on employers’ national insurance contributions (NICs) and a lower starting threshold will raise £25.7 billion by 2029-30.

The rate will increase by 1.2 percentage points to 15% from April 2025, with payments starting when an employee earns £5,000, down from the current £9,100.

The Office for Business Responsibility forecasts that by 2026-27 some 76% of the total cost is passed on through lower real wages – a combination of pay cuts and increased prices.

The measure could also lead to the equivalent of around 50,000 average-hour jobs being lost, the watchdog said.

The FTSE 100 slumped to a dismal new low as Rachel Reeves delivered her maiden Budget.

The Chancellor announced a hike in taxes by £40 billion as she promised to “fix the foundations” of the economy and repair the public finances.

The FTSE index at 1.30pm was down by 53.87 (0.66 percent) compared with the start of trading, having dipped sharply by 40.14 points first thing, before rallying.

In the first Labour Budget since 2010 – and the first ever delivered by a woman – Ms Reeves promised to “invest, invest, invest”.

But she said the “black hole” left by the Conservatives requires tens of billions of additional taxes.

Ms Reeves claimed the scale of the public spending problems she inherited were worse than previously thought.

She said the £22 billion “black hole” left by the Tories in this year’s finances showed they “hid the reality of their public spending plans”, with problems recurring in future years.

Ms Reeves also promised to set aside £11.8 billion to compensate those affected by the infected blood scandal and £1.8 billion to compensate victims of the Post Office Horizon scandal.

The Chancellor said: “Together, the black hole in our public finances this year, which recurs every year, the compensation payments which they did not fund and their failure to assess the scale of the challenges facing our public services means this Budget raises taxes by £40 billion.

“Any Chancellor standing here today would face this reality.

“And any responsible Chancellor would take action.”

Responding for the Conservatives, former Prime Minister and leader of the opposition Rishi Sunak was scathing in his criticism.

He said: “The truth has come out.

“On the day that he took office, the Prime Minister said that he wanted to restore trust to British politics with actions, not words.

“Well today, his actions speak for themselves with a Budget that contains broken promise after broken promise and reveals the simple truth that the Prime Minister and the Chancellor have not been straight with the British people.

“Time and again, time and again, we Conservatives warned Labour would tax, borrow and spend far beyond what they were telling the country. And time and again, they denied they had such plans.

“But today, the truth has come out, proof that they planned to do this all along, because today’s Budget sees the fiscal rules fiddled, borrowing increased by billions of pounds, inflation-busting handouts for the trade unions.”