Danni Hewson, head of financial analysis at AJ Bell, comments on the impact of today’s Budget on business and markets:
“Billed as a Budget for growth, there’s not much for businesses to get excited about. ‘Full capital expensing’ is pretty headline grabbing but 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 on this one.
“Getting businesses to look past the current economic uncertainties and increased costs for things like energy and labour is a must if the economy is going to achieve even the 1.8% growth the OBR is forecasting for next year and there will be some sectors taking a long hard look at the small print to see exactly what investments are covered by the scheme.
“And there will be plenty of smaller business owners with their heads in their hands after today’s Budget because despite the fact there has been extended help for households with energy costs, non-domestic users seem to have been left in the lurch, though putting more money in consumers pockets will help to a degree.
“One sector that had shouted the loudest in the run up to the Budget was hospitality and there will a few pints pulled in celebration today after the news that duty on beer in pubs will be up to 11p lower than that paid in supermarkets. The disparity has long been a source of contention and at a time many pubs are fighting to keep their doors open every penny is likely to count.
“Businesses will also benefit from moves to try and retain and return people to the workplace with a smorgasbord of announcements from pension changes to childcare reform. But in the case of the latter, it will take several years before it’s fully rolled out.
“This was billed as a boring Budget, it wasn’t that, but it also lacked a degree of oomph which business leaders had been calling for.”
Market impact
“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.
“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.
“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.”
