Interactive Investor

Spring Budget 2024: the policies that moved share prices

While the FTSE 100 moved little during the chancellor’s Budget speech, there were some pockets of interest that could affect investors.

6th March 2024 15:31

Lee Wild from interactive investor

Chancellor Jeremy Hunt failed to budge markets much while he was speaking in the Commons at lunchtime today, but there has been some share price reaction in a number of sectors as investors pick through the detail in his Spring Budget.

When he stood up to outline his tax and spending plans at 12:33, the FTSE 100 traded at 7,668.55. When he sat down an hour and six minutes later, it was three points lower at 7,665.75, having traded a 13-point range during that time.

Here are some of the policies that had City traders glued to their screens.

Housebuilders took a bit of a beating, down between 2% and 4% following a number of announcements in the Budget to reform the property tax system. The aim here is to make the system fairer and to “[encourage] residential disposals to boost the availability of housing”.

First, the government is reducing the higher rate of capital gains tax (CGT) for residential property disposals from 28% to 24%, possibly enticing encourage landlords and second home-owners to sell up. Second, the furnished holiday lettings tax regime, an incentive for landlords to offer short‑term holiday lets rather than longer-term homes, is abolished. And finally, Multiple Dwellings Relief also goes from 1 June this year.

Investors had hoped for news on a fresh round of help for first-time buyers, especially as higher interest rates have forced borrowing costs sharply higher. Nothing this time, though.

Shares in housebuilders Persimmon (LSE:PSN), Barratt Developments (LSE:BDEV), Taylor Wimpey (LSE:TW.), Berkeley Group Holdings (The) (LSE:BKG) and others all fell as the chancellor spoke. However, prices have staged a partial recovery as investors assess the true impact of the Budget.

Pubs, brewers and the hospitality sector had something to cheer about as the chancellor froze alcohol duty from 1 August 2024 until 1 February 2025. Following a six-month freeze announced at last year’s Autumn Statement, it was meant to rise by 3%, so today’s decision means there’ll be 2p less duty on a pint of beer, 1p less on cider, 10p less on a bottle of wine and 33p less on a bottle of spirits than if the increase had gone ahead.

It’s good news for pub owners Wetherspoon (J D) (LSE:JDW), Mitchells & Butlers (LSE:MAB), Marston's (LSE:MARS) and Whitbread (LSE:WTB), which owns the Beefeater chain among others, although biggest share price reaction was from Wetherspoons and M&B.

In a double whammy for the tobacco companies, the government has announced a tax on vapes and increase in tobacco duty from October 2026. This is expected to raise £615 million in 2028-29. Vapes have been a valuable new income stream for the tobacco companies as higher taxes have reduced cigarette consumption in the west.

British American Tobacco (LSE:BATS) and Imperial Brands (LSE:IMB), whose share prices have struggled for years, were weaker again today, but staged a mini rally after the chancellor sat down, perhaps having expected a more draconian intervention from Hunt.

The chancellor's announcement on the small modular reaction selection process took a little wind out of Rolls-Royce Holdings (LSE:RR.)’ sails, but only briefly. The high-flying engineer’s shares fell by a couple of pennies as the chancellor reminded us of plans to generate a quarter of the UK’s energy from nuclear power by 2050. Tenders for the small modular reaction selection process will need to be received by June. Shares didn't take long to recover. 

Hunt announced an extension to the energy windfall tax on oil & gas sector profits introduced in May 2022. The Energy Profits Levy (EPL) is designed to help people facing higher energy bills at a time of soaring profits for oil companies following Russia’s invasion of Ukraine. With gas prices forecast to remain “abnormally high until at least 2028-29”, the levy is extended until the end of March 2029.

However, there was some welcome certainty for the sector that the EPL will not apply if prices fall below levels set by the Energy Security Investment Mechanism. Shares in Serica Energy (LSE:SQZ), Harbour Energy (LSE:HBR), Capricorn Energy (LSE:CNE) and Energean (LSE:ENOG) are all higher.

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