London close: Stocks finish firmer in wake of big Budget
London stocks finished in the green on Wednesday, as investors pored through the finer details of Chancellor Rishi Sunak’s budget.
The FTSE 100 ended the session up 0.93% at 6,675.47, and the FTSE 250 was 1.22% firmer at 21,436.32.
Sterling was stronger as well, last rising 0.09% against the dollar to trade at $1.3968, and gaining 0.27% on the euro to €1.1571.
In his latest Covid-19 measures announced in the Budget earlier in the afternoon, Sunak extended virus-related rescue support to households, businesses and public services by a further £44.3bn, taking its total cost to £344bn.
There was no increase in personal income taxes, national insurance or value-added tax.
However, personal tax-free thresholds were frozen until 2026 and corporation tax was slated to rise to 25% from 19% in April 2023.
Companies with profits of less than £50,000 were spared, and would still pay 19%.
Sunak has spent £280bn to protect jobs and businesses from the ravages of the pandemic and stop the downturn turning into a lasting economic meltdown.
As a result, the UK’s national debt is £2.1trn and debt as a percentage of output, at 97.9%, is the highest since the early 1960s.
“The Conservative party is still determined to support the economy and help steer it through these difficult times,” said CMC Markets analyst David Madden.
“The hospitality sector has been given a boost as the reduced VAT rate, 5%, will remain for another six months.
“The planned increases in tax on beer and spirits has been pushed back too.”
The Office for Budget Responsibility also issued its latest forecasts, picking GDP growth of 4% in 2021, down from 5%, although its 2022 forecast was pushed up to 7.3% from 6.6%.
“Optimism in relation to the UK ending the lockdown and slowly removing its restrictions is still in circulation,” Madden added.
“Traders are rotating out of stocks that outperformed amid the pandemic.”
In equity markets, travel and leisure stocks were among the top performers, with British Airways and Iberia owner IAG up 6.81% and Premier Inn owner Whitbread ahead 5.55%.
Housebuilders were also in the green after the Chancellor confirmed that the stamp duty holiday would be extended, and announced a mortgage guarantee scheme providing for 95% mortgages for first-home buyers.
Barratt Developments, Persimmon and Taylor Wimpey were all in the green, by 7.07%, 6.2% and 5.38%, respectively.
Persimmon had earlier told the market that its forward sales were 15% higher than a year ago as it reported an 18% decline in annual profit.
BT Group shares surged 6.75%, after chancellor Rishi Sunak announced in his budget a new investment tax super deduction policy.
Under the scheme - which Sunak hailed the "biggest business tax cut in modern British history" - companies investing in new plant and machinery assets in the next two years will be able to cut their tax bills by 130% of the cost.
The super deduction will allow businesses to reduce their tax bill by up to 25p for every £1 they invest.
That would be worth around £25bn to UK companies over the two-year period the scheme will be in effect.
BT, which is currently investing millions of pounds to upgrade its UK broadband network to fibre optic, rallied on the news.
“There was plenty for investors to like in Rishi Sunak’s budget, including the extension of furlough until September, an extension to the stamp duty holiday to June, and £5bn in restart grants for businesses,” said Spreadex analyst Connor Campbell.
“Growth forecasts also improved, though the Chancellor did state that the economy will be 3% smaller in five years’ time than it would have been without the impact of Covid-19.
“What perhaps put investors off was an increase in corporation tax to a still-G7 low 25%, alongside news that the total cost of the pandemic response will hit £407bn by the end of 2022.”
On the downside, Avast was down 2.84% even after it reported a rise in full-year profit and revenue, underpinned by growth in its consumer direct desktop business as more people worked from home due to the pandemic.
Online grocer Ocado and Just Eat Takeaway - two firms that have benefited greatly from the various lockdowns amid the Covid-19 pandemic - were also on the back foot, as the Chancellor’s speech reiterated the government’s “irreversible” plan to gradually take England out of its current restrictions.
Ocado was down 2.06% and Just Eat Takeaway ended the day 2.05% weaker.
FTSE 100 - Risers
Barratt Developments (BDEV) 731.80p 7.07%
Persimmon (PSN) 2,895.00p 6.83%
International Consolidated Airlines Group SA (CDI) (IAG) 216.50p 6.81%
BT Group (BT.A) 134.35p 6.75%
Taylor Wimpey (TW.) 175.25p 6.00%
Whitbread (WTB) 3,597.00p 5.55%
Melrose Industries (MRO) 175.15p 5.08%
Barclays (BARC) 170.34p 5.01%
Flutter Entertainment (FLTR) 14,775.00p 4.85%
Legal & General Group (LGEN) 282.30p 4.05%
FTSE 100 - Fallers
Avast (AVST) 451.00p -2.84%
Scottish Mortgage Inv Trust (SMT) 1,162.00p -2.68%
Severn Trent (SVT) 2,161.00p -2.47%
SSE (SSE) 1,300.50p -2.33%
National Grid (NG.) 810.20p -2.17%
Rightmove (RMV) 584.00p -2.14%
Croda International (CRDA) 6,188.00p -2.09%
Ocado Group (OCDO) 2,138.00p -2.06%
Just Eat Takeaway.Com N.V. (CDI) (JET) 6,768.00p -2.05%
United Utilities Group (UU.) 863.40p -2.04%
FTSE 250 - Risers
Micro Focus International (MCRO) 498.30p 13.61%
Cineworld Group (CINE) 113.20p 8.76%
Hammerson (HMSO) 31.34p 8.24%
Crest Nicholson Holdings (CRST) 363.80p 7.90%
4Imprint Group (FOUR) 2,555.00p 7.11%
Carnival (CCL) 1,748.50p 7.04%
Liontrust Asset Management (LIO) 1,345.00p 6.80%
FirstGroup (FGP) 90.90p 6.74%
Countryside Properties (CSP) 511.00p 6.65%
Bellway (BWY) 3,186.00p 6.26%
FTSE 250 - Fallers
Hiscox Limited (DI) (HSX) 871.00p -11.84%
Renishaw (RSW) 6,280.00p -8.99%
Baillie Gifford US Growth Trust (USA) 335.00p -4.01%
Babcock International Group (BAB) 260.40p -2.94%
Indivior (INDV) 122.90p -2.31%
XP Power Ltd. (DI) (XPP) 5,200.00p -2.26%
Just Eat Takeaway.Com N.V. (CDI) (JET) 6,768.00p -2.05%
Provident Financial (PFG) 266.80p -2.05%
Drax Group (DRX) 381.40p -1.86%
Capita (CPI) 47.79p -1.78%