Interactive Investor

Spring Statement 2022: stocks to watch and share price reaction

23rd March 2022 15:11

Graeme Evans from interactive investor

Rishi Sunak's Spring Statement barely registered on the FTSE chart, but the Chancellor's policies could have an impact on some UK companies. Here are the stocks to watch.

BP (LSE:BP.) and Shell (LSE:SHEL) remained on top of the FTSE 100 index today as investors found few reasons to change course in the wake of the Chancellor’s Spring Statement.

Brent crude at $118 a barrel meant the oil giants were already 3% higher before the Chancellor stood up at 12:43, gains they consolidated amid relief that Rishi Sunak’s speech included no windfall tax on the industry.

The wider FTSE 100 index was barely moved, highlighting that events in Ukraine and efforts by central banks to rein in inflation are what continue to matter most to investors.

Stock market sentiment has been robust in recent days, but stagflation is a very real threat as the Office for Budget Responsibility today cut growth forecasts and warned that higher energy costs will push inflation towards a 40-year high of 8.7% later this year.

Sunak went on to warn that the UK must prepare for “the economy and public finances to worsen, potentially significantly” because of Russia’s invasion of Ukraine.

Inflation is also set to increase the UK’s debt interest bill to £83 billion, four times last year's amount and limiting the Chancellor’s scope to help on the cost of living crisis.

Liberum analyst Joachim Klement points out that initiatives such as today’s 5p a litre fuel duty cut will only make a small dent in the massive increase in energy costs. He added that pump prices have already gone up by around 16p a litre over the last three weeks.

Klement said: “The increase in energy prices and fuel costs should reduce monthly retail sales by about 0.3% per month in the coming quarter, in our view.

“The reduction in fuel tax reduces this drag to 0.2% per month, but it remains a drag on retail sales and consumption in general.”

The prospect of little change in the cost of living squeeze ensured that housebuilders including Persimmon (LSE:PSN) and Taylor Wimpey (LSE:TW.) remained under pressure in the FTSE 100 index. There was also little movement for consumer-facing stocks, with Restaurant Group (LSE:RTN) staying 1.9p lower at 69.9p and JD Wetherspoon (LSE:JDW) 19.5p cheaper at 809p.

Lloyds Banking Group (LSE:LLOY), which is one of the FTSE 100 stocks most closely tied to the fortunes of the UK economy, also put in an uninspired showing at just below 50p. And with no major announcement on defence spending, the likes of BAE Systems (LSE:BA.), QinetiQ Group (LSE:QQ.) and Avon Protection (LSE:AVON) stayed where they had been before the Chancellor’s speech.

Sunak did announce a reduction in VAT for energy saving devices in private homes, such as solar panels or heat pumps, from 5% to zero.

This is expected to reduce the cost of installing a solar panel by about £1,000 and may indirectly aid demand for home renovations like roof or garden improvements.

Liberum added: “Building materials suppliers like CMO Group (LSE:CMO), Travis Perkins (LSE:TPK) and Wickes Group (LSE:WIX) may see some marginal revenue benefits from this announcement but the overall effect is likely to be small, in our view.”

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