Market winners from Budget 2021

Russ Mould
3 March 2021

“Investors have reacted in a mixed fashion to the Budget after Chancellor Rishi Sunak pledged to extend furlough and support businesses,” comments Russ Mould, investment director at AJ Bell. “The Chancellor said more than 700,000 people have lost their jobs since the pandemic began, with the economy shrinking by almost 10% last year while borrowing is up.

“But the economy will recover, Sunak said, with forecast growth of 4% this year and 7.3% next year. He added that once recovery begins, the Government will begin fixing the public finances. 

“Banking stocks reacted positively to the Budget, with Barclays rising 3.6% to 168p, Lloyds up 2.1% to 39.7p, NatWest gaining 1.7% to 188.7p and HSBC increasing 1.6% to 430p. A stronger near-term economic outlook than previously expected bodes well for the sector.

“One of the most eye-catching announcements confirmed in the Budget was that the furlough scheme will be extended to the end of September.

“Leisure and hospitality stocks – which have been among the hardest hit during the pandemic – jumped on the news of both the furlough extension, and the continuation of a 5% reduced rate of VAT for tourism and hospitality extended to September, interim rate of 12.5% for further six months, and not returning to standard rate of 20% until April next year.

“Pub company JD Wetherspoon gained 5% to £13.09, Premier Inn owner Whitbread rose 5.1% to £35.81 and cinema chain Cineworld jumped 9.4% to 114.3p.

“The chancellor also confirmed the up-to-£500,000 nil-rate band for stamp duty will finish at the end of June, rather than the end of March as planned, and that first-time buyers will get a Government guarantee on 95% mortgages.

“Most of the big banks will be offering the 95% mortgages from next month, with the Chancellor saying: ‘We want to turn Generation Rent into Generation Buy.’

“Housebuilders gained on the news, with Persimmon one of the top risers in the FTSE 100 with a 4.9% gain to £28.43. Other housebuilders including Taylor Wimpey and Barratt Developments rose 3.8% to 172p and 3.5% to 708p respectively, with Berkeley Group up 2.7% to £43.63 and Redrow rising 3.5% to 579.5p.

“Another eye-catching announcement was the confirmation of the first ever UK Infrastructure Bank based in Leeds to drive a ‘Green Industrial Revolution’ and support public and private projects. Sunak said the bank will have an initial £12 billion capitalisation and expects to support £40 billion of projects, funding the likes of big offshore wind projects. There will also be a new retail savings product to give savers the chance to support green projects.

“Initial share price reaction from renewable infrastructure funds was relatively muted, with John Laing Environmental Assets edging just 0.6% higher to 114.7p, Greencoat UK Wind up 1.2% to 130.1p and The Renewables Infrastructure Group just 0.3% higher to 130.2p.”

Russ Mould
Investment Director

Russ Mould’s long experience of the capital markets began in 1991 when he became a Fund Manager at a leading provider of life insurance, pensions and asset management services. In 1993 he joined a prestigious investment bank, working as an Equity Analyst covering the technology sector for 12 years. Russ eventually joined Shares magazine in November 2005 as Technology Correspondent and became Editor of the magazine in July 2008. Following the acquisition of Shares' parent company, MSM Media, by AJ Bell Group, he was appointed as AJ Bell’s Investment Director in summer 2013.

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