City analysts said spending plans were in line with expectations, and were not likely to increase inflation.

Industry organisations welcomed the government's plans for infrastructure investments.

The City's benchmark index, the FTSE 100, stayed in the trading range where it had settled earlier in the day.

[There are] no obvious interest rate implications for the market

Mark Miller, Morgan Stanley

Investors appeared to be more concerned with share price movements on Wall Street and the impact of Monday's announcement by Opec to boost its oil output.

In the run-up to the spending review, sterling had strengthened on the markets, as traders expected it would not force up UK interest rates any further. The pound maintained its level as Mr Brown spoke.

These very large spending numbers are backed up by very large receipt numbers ... it's a dull day for the economists, it's an exciting day for the politicians

Robert Barrie, CSFB

The British Chambers of Commerce welcomed the Chancellor's spending targets, but warned the government would be "judged by whether this new investment is matched by real improvements on the ground".

The organisation urged that a greater sense of urgency was needed on transport to tackle the �20bn annual cost to business of congestion.

The director general of the Confederation of British Industry (CBI), Digby Jones, said he was "delighted that this government has been listening to business across the country of all sizes and in all sectors".

He said investing in transport and education would "go to the core of enhancing productivity in the medium-term".

Mr Jones added that CBI members across the country would "welcome the boost to regional development spending".

The Institute of Directors (IoD) was more critical, saying Mr Brown had taken risks with his "generous" spending plans.

Ruth Lea, head of the IoD's policy unit, said there was little guarantee the cash injections would "deliver the goods".

"Merely pouring extra money into the education, and, particularly, the health services without long overdue structural and managerial changes is most unlikely to provide the services that people are increasingly demanding," she said.

Inflation fears disappear

There had been fears in the City that Mr Brown could present spending plans which could drive up inflation and trigger a fresh of interest rate rises.

But most experts argued Mr Brown's figures were unlikely to have an impact on the interest rate outlook. They pointed to the fact that the Bank of England's rate-setting Monetary Policy Committee had been briefed on the broad thrust of the review since March and left rates on hold.

Once the figures were out, analysts agreed that the chancellor had stayed "pretty well in line with expectations".

There were "no obvious interest rate implications for the market" said Mark Miller of Morgan Stanley.

Jeremey Hawkins, economist with Bank of America in London, said it would be difficult to see how the spending plans could have "too much of an impact" on inflationary pressures.

Philip Shaw of Investec said even though the spending figures represented "real annual growth of around 5.5% a year, without getting a fuller picture it's difficult to say whether Mr Brown's spending plans are expansionary".

The Chambers of Commerce, though, worried that the chancellor's commitment to raise spending over the next three years "at a faster rate than growth in the economy could have inflationary consequences".

If interest rates would go up and sterling strengthened, manufacturers would come under even more pressure.

But Robert Barrie of CSFB said the very large spending numbers were backed up by very large receipt numbers.

"Remember we are in budget surplus at the moment and if you measure fiscal policy that way he's still running a fairly tight policy and will do throughout this period. It's a dull day for the economists, it's an exciting day for the politicians", he added.

City analysts will now go with a fine comb through the review's fine print and look for anything they might have missed that could boost inflation.