The release of the Chancellor’s Autumn Budget is always an interesting time for anyone with a stake in UK business.
Whether you own your company, supply products/services to a specific sector or are simply a customer of domestic brands, the Budget can have a significant impact on the amount of money – be it more or less than before – that will be flowing to/from your account.
For those interested in trading the shares of UK companies, the Budget will also impact the value of those assets – sometimes for a long-term gain amid a short-term loss.
Rishi Sunak called his latest budget his ‘post-Covid age of optimism’. However, when set against the backdrop of tax increases and mass inflation, the idea of 80p off a pint might not exactly be filling the average voter with a tremendous sense of positivity.
But what about UK business? Has Sunak’s budget laid the foundation for improved trading conditions?
Driving economic growth
The Chancellor knows that he needs to get the average Joe and Jane spending again, and that’s why he has made several significant moves in an attempt to increase taxable revenue.
As any top social trading broker will tell you, the strength of the economy impacts market sentiment and, therefore, trading activity – a strong economy can be a trigger for buying positions, and the converse is true for selling.
The good news on that front is, as Sunak revealed in his budget, that the growth projections are up while the unemployment forecast has been downgraded.
Economic growth, expected to be sluggish post-pandemic, has been encouraging and has seen an uptick in the forecast accordingly – from 4.5% to 6.5% in 2021 and a further 6% next year too.
The unemployment expectancy has decreased from 12% to 5.2% – a significant drop-off and an indicator of the kind of economic rally traders are looking for.
Revitalising the high street
It’s fair to say that the UK high street has taken a kicking in the wake of online shopping popularity exacerbated by the reluctance of some to visit retail outlets in person throughout the pandemic.
The past 18 months have been nothing short of a disaster for the hospitality sector, too. Sothe Chancellor needed to provide more agreeable conditions for those hit hardest by closures and reduced capacities.
To that end, you would expect his business rates discount to be a source of some hope. This could net many retailers and restaurants, bars and clubs as much as £100,000 in tax relief, and given what has gone before, this will surely prove to be a massive help.
Revaluations will also occur every three years from 2023. There will be a 12-month rates’ holiday’ for those embarking on property improvements, and further tax relief will be given to those who adopt specific green energy technologies.
By and large, most traders will have shunned high street businesses in recent years for obvious reasons – could hopes of a renaissance increase the interest in retail shares as well?
Research & development
One of the most beloved buy indicators for traders is when a company shows innovation, often through research and development, which will help them take their operations to the next level.
To that end, the Chancellor has announced a series of relief packages to those firms wishing to embark on their own research and development.
The likes of cloud computing and data analysis will be added to the docket of innovations that qualify for R&D relief. At the same time, in the big picture, Sunak has revealed a £22m fund to cater for enhanced research and development activity – that’s thought to be the most significant increase in R&D investment in modern budget history.
The UK regions will also benefit to the tune of £1.7bn, while Scotland, Wales and Northern Ireland will net more than £300m to finance redevelopment and innovation projects.
The supply chain
One of the issues that have led to some reluctance on the part of traders has been the supply chain woes that have dogged some UK firms.
Rising energy bills and the petrol supply crisis shook the economy and investors’ confidence, so the Chancellor has had to move to dispel fears in those areas.
As such, he has abolished a levy on HGV logistics until 2023 and frozen duty on heavy goods vehicles on UK roads – will that be enough to offset the eye-watering high fuel prices ?
Sunak has decided to try and spend his way to a more vibrant economy. Only time will tell if it’s the right call for traders.