UK stocks fall on concerns over state finances after costly U-turns

(Reuters) -British stocks fell on Wednesday, part of a wider selloff of UK assets, amid rising concerns over public finances after finance minister Rachel Reeves appeared in tears in parliament following a series of costly U-turns on welfare reforms.

The blue-chip FTSE 100 lost 0.1%, while the domestically-focussed midcap index declined 1.3%, widely underperforming European peers.

Concerns over Reeves surfaced after her distressed appearance during a session of Prime Minister's Questions in the House of Commons, a day after the government's welfare reform bill was approved only after excluding measures that would have led to fiscal savings in the long run.

Prime Minister Keir Starmer's press secretary tried to quell rumours that Reeves might be replaced by saying "the chancellor is going nowhere, she has the prime minister's full backing".

Asked about Reeves, a Treasury spokesperson said it was a "personal matter" that had caused her distress.

Government bond prices fell by the most since October 2022 and the pound dropped by more than 1%.

"This is a sign of fiscal stress, which the UK has had to weather before," said Kathleen Brooks, research director at XTB.

"The FTSE 100 is less exposed to domestic policies; however, the FTSE 250 is down. With all the main UK asset classes under stress today, the government needs to be careful about its next steps."

Household goods and home construction index declined 5.9%, leading sectoral losses. Bellway fell 8%, while Taylor Wimpley lost 4%

Industrial metals and mining stocks led gains on the chart, tracking higher metal prices. Ferrexpo rose 3.6% and Antofagasta added 4.2%. Glencore rose 5.1%, also aided by $1 billion share buyback starting.

Oil and gas companies gained 2%, with heavyweights BP and Shell adding 3.2% and 1.7% each.

Among individual stocks, Spectris gained 4.3% after the firm agreed to a debt-inclusive 4.7 billion pounds ($6.46 billion) offer from KKR over Advent's rival offer.

Bytes Technology slumped 31.5% to the bottom of the midcap index after warning of lower operating profit for the first half of 2026.

British fast food chain Greggs fell 15.1% on saying its annual operating profit could dip as a heatwave in the UK discouraged customers from eating out.

Restaurant chain operator SSP Group climbed to the top of the midcap index, rising 7% after filing for Indian IPO of airport lounge operator Travel Food Services.

(Reporting by Twesha Dikshit and Ankita Yadav; Editing by Sahal Muhammed and Gareth Jones)