“Official Portrait of Mr. Hammond” by Chris McAndrew (CC BY 3.0)
Philip Hammond has announced the new UK budget, and it could signal a rallying point for suffering UK stocks. The new budget has been called the end of the era of austerity. The move by the UK Chancellor of the Exchequer is nonetheless no distraction from looming Brexit uncertainty. Will it be enough to cause a recovery for flagging UK stocks?
The budget had been expected to drop in mid-November. The early arrival was likely decided upon in order to avoid creating conflicts with a potential final deal on Brexit. In fact, the new budget will likely see amendments when and if such an agreement is reached in the coming weeks.
The Brexit vote has done no favours to UK stocks. Markets hate uncertainty, and investors the world over have been dropping UK equities. Recent domestic markets are approaching 2-year lows, and strategic CFD trading has given some profits from predictable declines. So what good might the new budget do for suffering securities as we learn what the budget contains?
Government spending could increase, benefiting certain industries (Source: PixaBay)
Which Industries Will Be Most Affected By the New Budget?
There are many industries which could see a valuation boost due to specific provisions in the new budget.
Banking
Removal of the bank levy has been a lobbying item for the UK finance lobby. It is thought that to carry the levy into the future would hinder UK banks’ competitive efforts in the months and years following Brexit. The new budget could also see the end of the balance sheet tax. This would be a good thing for UK-facing banks like Lloyds and the Royal Bank of Scotland.
Residential Building
The Chancellor may extend Help-to-Buy, which could increase new home ownership and help boost the slowing housing market in London. The government may consider an increase in stamp duty for foreign home purchasers, which could adversely affect building-related stocks.
The Retail Sector
A break on commercial property taxes could give retail owners a chance to revitalise their brick and mortar businesses, which continue to suffer from the online retail revolution. Groceries, shops, pubs and more would be affected.
Online Sales
Powerful voices in retail have also called for a 2% “Amazon Tax” to be placed on online retail sales. Hammond has been clear in the past that if international online retail tax agreements can be made, the UK would be courageous in forging its own requirements.
Roads & Infrastructure
Billions will be slated for modernisation efforts for Britain’s roads and related infrastructure. Construction firms should see valuation increases as these billions trickle down into projects.
Alcohol
Duties for ciders, beers, and cigarettes are likely to be re-examined in this budget. Many brewers are likely to see a bit more financial freedom moving forward.
As the nation digs into the meat of the new Budget, there is much room for corporate optimism. We’ll see in the coming days if traders feel the same.
