UK Spring Budget 2017 preview – how might companies be affected?

The Chancellor, Philip Hammond, can point to a resilient economy, rising tax receipts and lower borrowing when he delivers his first Spring Budget on Wednesday (March 8th). But the triggering of Article 50 is sure to weigh on the outlook for the UK economy, meaning give-aways might be few and far between.

Here we detail a few potential areas of interest and the companies and sectors that might be affected.

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Business Rates

 

Can the Chancellor do more on business rates? A campaign to reduce the impact of changes due to take effect in April has drawn support from just about every corner of the business community. Meaningful relief for larger businesses is not expected but there is always a chance Mr Hammond may pull off a surprise.

Sainsbury’s and Alton Towers owner Merlin Entertainments are among a number of listed firms to join calls for reforms as business group warn of closures on the high street.

In addition to retailers, pubs and restaurants are also on the hook to pay more. It might be worth looking at Whitbread, owner Costa Coffee, Premier Inn, Beefeater Grill and Brewers Fayre. Pub chains Mitchells & Butlers and Wetherspoons are also affected.

Zero Hours Contracts

 

Employment legislation could be a hot topic. Many of the groups hit by business rate rises are also being squeezed by increases to the National Living Wage. Faced with a squeeze on living standards from rising inflation, the chancellor is expected to continue with his predecessor’s plans to steadily raise this.

Zero hours contracts might also come under fire after the number of people employed on them hit a record high. A host of retail stocks might be affected if the chancellor does take action.

Social Care

 

The creaking social care sector is due a lift and the chancellor is expected to deliver it. As much as £1bn could be earmarked to help. Embattled outsourcer Mitie just offloaded its loss-making social care arm for just £2.

Insurers could be impacted if the chancellor decides to encourage a market for private insurance by capping the amount people would pay. A death tax – raiding people’s estates to pay for the social care they enjoyed before shuffling off – might be introduced.

Gaming

 

We’ve already seen a raft of changes to the gaming sector but investors should be mindful of any fresh announcements from the chancellor. William Hill, Ladbrokes Coral and PaddyPower Betfair are among the most high profile stocks to watch.

Fixed odds betting machines might be an issue that raises its head again. The industry warns it will decimate the industry and cost up to 20,000 jobs, while MPs are minded to slash the amount people can wager. A clampdown is priced in already but could we see an outright ban?

Alcohol Duty

 

Will the Chancellor ease the pressure on pubs and the alcohol business?  Could the Scotch whisky industry get a much-called for cut to duty? Diageo is usually worth watching alongside brewers like Greene King as the government is expected to freeze beer duty – a hike would hit earnings.

Tobacco

 

Sticking with sin taxes, the government is expected to announce a minimum excise tax (MET) on cigarettes. Such a move would hit the lower end of the market by placing a floor under the price of a packet. British American Tobacco is against the plans, warning that it will push lower-income smokers to the black market.  

Energy

 

After Npower said it will raise electricity prices by 15%, there is renewed talk from the Labour benches about a cap on energy pricing. Don’t expect Mr Hammond to bite but we could see some measures around here after the prime minister warned that the government would intervene if the market was seen to be failing. Any measures could impact the likes of SSE and British Gas owner Centrica, which have yet to announce price hikes.

Stamp Duty

 

Stamp Duty reforms are a favourite for chancellors looking to make money out of Britain’s ever-rising property market. Estate agents are usually the most sensitive – Foxtons and Countrywide, both reeling from Britain’s vote to leave the EU, will be ones to watch if any changes are announced.  They are being killed by the higher stamp duty rate for expensive homes – but don’t expect the chancellor to do anything to help. Kicking estate agents is just about as easy as it gets for a Tory chancellor.

Help to Buy

 

Help to Buy or Help to Build? Whatever is more accurate, it’s clear that government support to first time buyers has been a boon for housebuilders. Persimmon, Taylor Wimpey and Barratt Developments are among the biggest listed firms to benefit. Any further support on this front would likely help these companies.

Infrastructure

 

HS2 and Heathrow’s third runway are going ahead but with Donald Trump outlining $1 trillion in infrastructure spending, Mr Hammond might be minded to announce new support to boost this area of the economy. Keep an eye on engineering firms like Costain Group and Weir Group.

Pensions & Insurance

 

Pension tax relief looks set to come in Mr Hammond’s crosshairs as he looks for cash to pay for elderly social care. Currently the relief is based on your income tax bracket but the chancellor may favour a flat rate. The likes of Prudential, Standard Life, Old Mutual, Aviva among others.

Royal London policy director and ex Conservative pensions minister Steve Webb thinks the chancellor will reduce the government spending on pension tax relief, which cost the Treasury nearly £25bn last year. A death tax to pay for adult social care could also impact if introduced.

Meanwhile insurance may due some changes. Insurance Premium Tax could be hiked which would raise the cost of cover. AA, Direct Line and Admiral are usually sensitive to these kinds of changes. These firms are still reeling from the decision to slash the Ogden discount rate to 0.75%.

Oil

 

The North Sea oil and gas sector has had a rough time of it with Brent prices depressed. But as crude has rallied since the Autumn Statement the outlook as improved. Facing down calls from the SNP and the prospect of another independence referendum, the government may be minded to offer more support, particularly around investment. FTSE giants BP and Shell are the ones to watch, but also look at Tullow Oil and Premier Oil.

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