The FTSE 100 came off session highs, but closed up 0.6 percent after George Osborne, the U.K. finance minister, reported his annual borrowing and spending plans to the U.K. parliament.
At the same time, the U.K's fiscal watchdog slashed growth and productivity forecasts for the country as the outlook for the world economy now appears to be "materially weaker" than it did in its last outlook in November last year. Sterling fell against the dollar on the news, last standing at $1.409, down 0.4 percent at Europe's close.
Shares of U.K. banks ended mixed to slightly higher, with HSBC closing up almost 1 percent, while Standard Chartered and Lloyds finished in the red. This comes after Osborne announced minor changes to tax laws for the country's lenders.
Tate & Lyle shares sank almost 2 percent after Osborne announced a levy sugar tax on the drinks industry. Shares pared in later trade, closing down some 1 percent. Soft drinks maker Britvic also slipped, off 1.3 percent.
Read MoreUK unveils 'sugar tax', slashes growth outlook