On a miserable day for stock markets amid concerns about the banking sector, UK chancellor Jeremy Hunt managed to pluck enough rabbits out of the hat to halt the decline in the FTSE 250 share index and trigger a small recovery.
The FTSE 250 is typically seen as a better benchmark for the UK economy than the FTSE 100 because it has a greater number of domestic companies in its index. Before the Budget got underway, the mid-cap index had fallen from 19,129 from 18,552, but it managed to recover to 18,602 by the time Hunt’s speech had finished.
Helping to drive a turnaround was news that the OBR no longer forecasts the UK will be in technical recession this year and the chancellor’s plans to drive economic growth through a series of measures.
Businesses were treated to a new ‘full expensing’ regime whereby they can reduce their tax by investing in IT equipment, plant or machinery. Hunt hopes this new scheme will incentivise investment in the way that the previous super-deduction scheme failed to do.
Danni Hewson, AJ Bell head of financial analysis, said: ‘As commiserations prizes go “full capital expensing” is pretty headline grabbing. The problem is it replaces the super-deduction which at 130% was a tad more generous. Businesses are also having to factor in the increase in corporation tax, so it feels a bit like they’ve been short-changed with this one.’
Pub companies had reason to celebrate after the Government said it would increase Draught Relief from 1 August to freeze the duty charged on a typical pint of beer in the pub and ensure this will always be lower than in the supermarket. Hunt said: ‘British ale is warm, but the duty on a pint is frozen.’ Tim Martin at JD Wetherspoon (JDW) will be delighted and so too were shareholders in his business, with the stock jumping 3% on the news.
The chancellor gave the message that UK was pro-nuclear and launched a competition for small modular reactors, a key area of focus for Rolls-Royce (RR.).
Potholes continue to be a nuisance on the roads and Hunt pledged to lift the budget to repair them each year by 40% to £700 million. That creates bigger opportunities for companies which spend time fixing the nation’s highways including Costain (COST), whose share price perked up on the news.
Other key bits of interest to investors include the news that the government will announce plans in the autumn to make London a more attractive place to list their shares for companies.
But the biggest takeaway of the lot for investors was the abolishment of the pensions lifetime allowance and raising the maximum you can invest tax-free in a pension each year from £40,000 to £60,000. The pensions lifetime allowance is currently set at £1.07 million and is the amount workers can build up in a pensions pot before they have to pay extra tax.
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Daniel Coatsworth) and the editor of the article (James Crux) own shares in AJ Bell.
