Funds to benefit from fiscal and monetary stimuli announced in the budget

The Chancellor announced a raft and fiscal and monetary stimuli in his Spring Budget 2020 speech which could spell good news for investors.

Dzmitry Lipski, Head of Funds Research, interactive investor, picks the funds and trusts best placed to benefit from big initiatives.

Small business support package

The Chancellor Rishi Sunak announced £30 billion stimulus to support the economy through coronavirus and extra help for smaller businesses to tackle cashflow problems over the period.

He also promised a £3,000 cash grant per business for any firm that is currently eligible for the small business rates relief. This is a £2 billion cash injection direct to 700,000 of our smallest businesses. 

Government also to abolish business rates for one year for small shops, cinemas, restaurants and music venues with a rateable value of less than £51,000. That is a tax cut worth over £1 billion, saving each business up to £25,000. A loan guarantee scheme will be launched for banks’ lending to small businesses on amounts of up to £1.2 million. 

Initial reaction from the markets has been somewhat muted however, we may get some sort of bounce from the UK equity funds, particularly those investing in mid and small domestic companies should benefit from a potential pick up in sentiment on the back of promised stimulus.

Fund ideas:Man GLG UK Income, Henderson Smaller Companies (LSE:HSL) and R&M UK Recovery Fund.

Climate Change Levy 

With a focus on tacking pollution and encouraging energy efficiency the government is to freeze the levy on electricity and raising it on gas from April 2022. In addition, the Climate Change Agreement scheme is to be extended for a further two years to support the most energy-intensive industries to transition to net zero carbon emissions.

The Chancellor also promised to spend £500 million to support the roll-out of new rapid charging hubs for electric cars and invest £300 million in tackling nitrogen dioxide emissions in towns and cities across England.

Fund idea:VT Gravis Clean Energy Income offers exposure to companies engaged in the provision, storage, supply and consumption of clean energy (50% in UK).

Affordable housing

The Chancellor promised to extend the Affordable Homes Programme with a new, multi-year settlement of £12 billion, describing it as the largest cash investment in affordable housing in a decade, when the Conservatives came into government. The government also to cut interest rates by 1% on lending for social housing with more than £1 billion of discounted loans available for local infrastructure and £650 million of funding to help rough sleepers into permanent accommodation. 

Fund ideas:Threadneedle UK Social Bond invests in bonds issued by companies, governments, voluntary organisations such as housing associations, healthcare charities and universities that engage in socially beneficial activities and development.  

HICL Infrastructure (LSE:HICL) invests in infrastructure for local communities and to support the delivery of essential services, working in partnership with the public and private sectors (75% in UK).