London markets cheer on Chancellor’s budget: FTSE rises 0.8% or 53 to 6,667 points as Rishi Sunak unveils more big spending to boost Covid-hit economy
- FTSE 100 index of UK’s leading companies up 0.8% or 53 points at 6,667 today
- However it had been up further in early trading in London at 6,703 this morning
- Hotel operator Whitbread, caterers Compass Group and IAG among top gainers
- Today’s Budget plan includes a five-month extension of furlough jobs scheme
The FTSE 100 index of Britain’s leading companies was up 0.8 per cent or 53 points at 6,667 this afternoon, although it had been up further in early trading at 6,703.
Hotel operator Whitbread, catering firm Compass Group and British Airways-owner IAG were among the top gainers on the index, with banks having the biggest boost.
The Budget plan includes a five-month extension of the furlough jobs scheme to steer the economy through what is hoped to be the final months of restrictions.
Mr Sunak said measures to support the economy amounted to £65billion over this year and next, taking the total Government support to £407billion over that period.
He also told MPs this afternoon that the UK’s recovery from the economic damage caused by coronavirus will be ‘swifter and more sustained’ than previously thought.
TODAY: The FTSE 100 index rose to 6,703 this morning before trading at 6,667 this afternoon
PAST MONTH: The FTSE has had a positive few days this week after suffering a fall last week
PAST 18 MONTHS: The FTSE plunged when the pandemic began but has since been recovering
However he warned politicians in the House of Commons that it would take ‘a long time’ to rebuild and pledged to do ‘whatever it takes’ to support people.
The Office for Budget Responsibility expects the economy to return to its pre-Covid level by the middle of next year – six months earlier than they previously thought.
But he also told MPs that despite the £280billion of support already committed to protecting the economy, the ‘profound’ damage done by the virus has been ‘acute’.
Mr Sunak said: ‘Our economy has shrunk by 10 per cent – the largest fall in over 300 years. Our borrowing is the highest it has been outside of wartime.
Chancellor Rishi Sunak delivers a Budget statement to the House of Commons in London today
The London Stock Exchange sign in the City is pictured. Investors reacted to the Budget today
‘It’s going to take this country – and the whole world – a long time to recover from this extraordinary economic situation. But we will recover.’
The Chancellor said the OBR expects the economy will be 3% smaller than it would have been in five years’ time because of the coronavirus crisis.
However it also forecasts that the economy will grow this year by 4 per cent, by 7.3 per cent in 2022, then 1.7 per cent, 1.6 per cent and 1.7 per cent in the next years.
Meanwhile in Germany today, there was positive sentiment as the country’s Dax rose 1 per cent to hit a record high with the government set to relax coronavirus rules.
Analysis: Fresh bandages and splints administered by Rishi Sunak to mend economy’s broken parts
By SUSANNAH STREETER
The budget once again outlined how the damage caused by the coronavirus crisis has been acute, but there were plenty of fresh bandages and splints administered by Rishi Sunak to mend the broken parts of the economy, boosting hospitality and airlines in particular. But long term the rehabilitation of the economy is forecast to be swifter and that has also buoyed the pound, which has held onto gains against the euro and the dollar.
The super deduction measure, enabling companies to reduce their tax bill by 130 per cent of the cost of investment is aimed at boosting the UK’s lagging productivity rate which is being viewed favourably in terms of longer term growth.
This has helped offset concerns that an increase in the corporation tax rate from 2023 could prove a drag on the recovering economy.
The rise in sterling has dragged down gains on the internationally focused FTSE 100 to some extent but the most domestic FTSE 250 has perked up by around 1 per cent.
Whitbread is the top riser on the FTSE as a package deal of measures for hospitality is expected to help it recover its mojo.
The VAT cut to 5 per cent has been extended for the sector until September with a higher but ongoing reduction lasting until April.
Pub chains Mitchell and Butler and JD Wetherspoon on the FTSE 250 will also benefit from the freeze on alcohol duty which has helped send their share prices higher.
British Airways owner IAG has been a big recipients of the furlough scheme to date so the extension is likely to help ease the company through the ongoing crisis, with a flightpath to opening of international travel still not laid out.
Housebuilders are among the biggest risers on the FTSE 100 today with stamp duty relief staying in place for longer. A new government backed 95% loan guarantee scheme is also seen to be a boost for the sector, with fears of an end to the mini housing boom fizzling out.
Taylor Wimpey and Barratt have gain by more than 3 per cent and Persimmon was up by more than 4 per cent after it announced it was restoring its annual rate of dividends.
While this budget was never going to be a panacea for struggling firms, hopes seem high that it will provide a kick start to a sustained recovery after the devastation caused by the coronavirus crisis.
Susannah Streeter is a senior investment and markets analyst at Hargreaves Lansdown