- Banks might avoid a new tax, but a Cash ISA allowance cut could hurt mortgage market
- Gambling sector vulnerable to higher taxes
- Oil and gas sector primed for boost from North Sea drilling rule changes
- Tourist tax might not trouble leisure sector too much
- Housebuilders may be hoping for a surprise up the chancellor’s sleeve
Dan Coatsworth, head of markets at AJ Bell, comments:
“With the protracted wait almost over for Labour’s second Budget, investors will be watching the market reaction to changes announced by the chancellor in Parliament when she steps up to the despatch box later today. But many will be wondering which sectors could be most affected by changes, with the heavily trailed ‘smorgasbord’ approach to taxation likely to impact a number of businesses.”
Banks
“Banks may have jumped in early trading as investors continued bet the sector will escape a new levy on profits, a prospect which had been doing the rounds in recent weeks. However, there is the potential for some volatility if the chancellor takes the axe to the Cash ISA allowance.
“Cash deposits are an important source of funding for lenders and the prospect of less money going into savings accounts could, in a worst-case scenario, see lenders either reduce mortgage availability or find alternative sources of funding which could be more expensive and lead to higher mortgage rates.”
Gambling operators
“The gambling sector always hides under a blanket on Budget Day as it is prime meat for higher taxes. It is an easy target as politicians frequently declare war on gambling to curb addiction. Any major tax changes could weigh on the likes of William Hill owner Evoke and Ladbrokes’ parent Entain.”
Oil and gas companies
“The oil and gas sector could be fired up by a new North Sea strategy. The government is expected to relax restrictions on drilling in the North Sea and potentially bring forward the expiry date on a windfall tax. That could encourage investors to look more closely at such stocks as Serica Energy and Harbour Energy.”
Hotel companies
“Parts of the leisure sector have had a disrupted night’s sleep at the prospect of a tourist tax. There is chatter that the chancellor is eyeing tourists as a source of revenue, introducing a tax that is already commonplace in holiday destinations such as Croatia and Greece.
“Such a tax would be a minor headwind for Premier Inn owner Whitbread and Park Plaza group PPHE as it would push up costs for their customers, but may not stop visitors completely.”
Housebuilders
“It wouldn’t be a Budget without some new incentive to support the property market. All the property-related speculation has been focused on a wealth tax or mansion tax, targeting pricier abodes with extra council tax.
“What’s been missing is the usual chatter around new incentives to help more people get on the housing ladder. Rachel Reeves might have purposely kept something up her sleeve as the slightest bit of good news could help to marginally offset the variety of bad that’s expected elsewhere.
“Nothing is certain, so shares in housebuilders might simply be influenced post-Budget by any movement in the gilt market, as that has a major influence on mortgage pricing and therefore affordability for prospective customers seeking to buy a house or flat.”
