By Kit Rees and Alistair Smout
LONDON (Reuters) - Britain's top share index rose on Wednesday as oil and gas stocks and housebuilders rallied on the back of proposals in Chancellor George Osborne's annual budget statement.
Britain's FTSE 100 was up 0.5 percent at 6,168.57 points by 1407 GMT, outperforming the broader European market.
As part of his statement, Osborne cut Britain's growth forecast for 2016 and 2017.
"There (are) some big question marks in regards to targets as far as the economy is concerned and being able to turn a surplus," said Alastair McCaig, market analyst at IG.
Investors, however, were cheered by a reduction of the rate of 'supplementary charge' on oil and gas produced to 10 percent from 20 percent, effectively abolishing petroleum revenue tax.
Britain's oil & gas sector extended its gains, rising 2.7 percent while shares in Royal Dutch Shell (LON:RDSa) and BP (LON:BP) rallied 2.5 percent and 2.7 percent respectively.
Md-cap Tullow Oil (LON:TLW) jumped 5.2 percent.
The sector was also buoyed by a rise in oil prices following an announcement that producers will meet next month in Qatar to discuss a proposal to freeze output and on growing signs of a decline in U.S. crude production.
Housebuilders also rose, with traders citing government plans to encourage building of new homes on brownfield land, as well as relief that there were no additional taxes or levies announced for the sector, which is seeing stamp duty on some properties rise in April already.
Barratt Developments (LON:BDEV), Taylor Wimpey (LON:TW) and Persimmon (LON:PSN) all gained between 2.5 to 3.2 percent
Likewise plans to increase the limit on ISA savings accounts gave a boost to personal finance stocks St. James's Place, Hargreaves Lansdown (LON:HRGV) and Brewin Dolphin.
However, mid-cap company Tate & Lyle (LON:TATE), which produces sweeteners, slipped 1.4 percent and soft drinks companies Britvic (LON:BVIC) and A.G.BARR fell 2.4 percent and 4.8 percent respectively after Osborne said Britain would introduce a new sugar levy on soft drinks.
Nichols, maker of the soft drink Vimto, slumped nearly 10 percent.
Among the fallers, miner Antofagasta (LON:ANTO) dropped 5.2 percent, extending its losses from the previous session after a smattering of target price downgrades after it cancelled its final dividend on Tuesday.
London Stock Exchange was down 0.6 percent after it said it had reached a merger agreement with Deutsche Boerse (DE:DB1Gn) which could bring potential cost savings of 450 million euros (£355 million) a year for the combined company.
A downgrade by investment bank Citi on tour operators TUI and mid-cap Thomas Cook hit both stocks which dropped 6 and 4.5 percent respectively.