By Helen Reid
LONDON (Reuters) - Britain's top share index touched a session high as chancellor Philip Hammond delivered his budget statement on Wednesday, boosted by a dip in sterling as Brexit-bound Britain slashed economic growth forecasts.
Housebuilding stocks swung sharply, losing ground after Hammond announced a review of unused planning permissions, though a stamp duty exemption to spur house buying offered some support to the sector.
The FTSE 100 <.FTSE> ended the session just 0.1 percent higher at 7,419.02 points as sterling recovered and headed higher, though the blue chip index still outperformed a negative European market.
Hammond, walking a tightrope between managing weak public finances and offering sweeteners to win back voters, had little room for the bold moves demanded by many in his Conservative party to help households after years of spending cuts.
Sterling fell sharply on the growth downgrade before bouncing back, and the FTSE traded just off its earlier highs.
Housebuilders <.FTNMX3720> hit a session high, up 1.6 percent, before falling back to end the day down 0.3 percent after Hammond said the government would review unused planning permissions and consider compulsory purchases if sites were being withheld for commercial rather than technical reasons.
Barratt Development <BDEV.L>, Persimmon <PSN.L> and Berkeley <BKGH.L> were among the worst-performing FTSE stocks, down 1.9 to 3.7 percent.
"On one hand it's going to encourage housebuilders to use their land bank ... but if you are suddenly getting a flood of properties or land banks being used in the short term the market might think it could depress prices," said Paul Mumford, UK fund manager at Cavendish Asset Management.
The benefits from the stamp duty exemption could trigger demand in the short term, he said.
The housebuilding sector <.FTNMX3720> has been among the best performing in the UK this year, up 9 percent.
Dollar earners including Shire <SHP.L> and Reckitt Benckiser <RB.L> were among top gainers on the pound's earlier pullback. Reckitt was also helped by an upgrade to "overweight" from JP Morgan.
Among other movers, Thomas Cook <TCG.L> was the stand-out, down 8.4 percent after results.
The mid-cap tour operator revealed shrinking UK margins after four consecutive years of profit growth, indicating competition in the sector was heating up.
"This is much worse than expected despite TCG flagging margin pressure through the year," Barclays analysts said in a note. "The major issue is exposure to Spain (about 44 percent of UK business) - ... TCG needs to remix capacity away from Spain."
Financials were the biggest contributors to index gains with Standard Chartered <STAN.L> up 2.9 percent after sources said the bank was close to selling its real estate principal finance unit to private equity firm Actis.
(Reporting by Helen Reid and Kit Rees; Editing by Mark Heinrich)