AUTUMN BUDGET 2021: Teetotal Chancellor Rishi Sunak toasted by investors after unveiling tax cuts for pubs, restaurants and airlines
Teetotal Chancellor Rishi Sunak was toasted by investors after he unveiled tax cuts for pubs, restaurants and airlines in the Budget.
Businesses were braced for further levies after huge rises in corporation tax and national insurance in Sunak’s previous outings.
Instead, he unveiled sweeping reforms of alcohol duties and cuts to air passenger duty as well as business rates.
Investors were also cheered by Office for Budget Responsibility (OBR) forecasts, with growth upgraded and borrowing cut as the economy leaves the pandemic behind.
The OBR predicted growth of 6.5 per cent for this year, up from previous predictions of 4 per cent, meaning the UK economy is expected to return to pre-pandemic levels by the end of 2021.
Joshua Mahony, analyst at IG Index, said: ‘The Budget brought plenty of cheer for pubs. The decision to halve business rates for those in the retail, hospitality and leisure sectors does provide a welcome boost for businesses getting back to normal after a hugely disruptive pandemic period.’
The top risers on the FTSE 350 were Mitchells & Butlers, up 5.7 per cent, JD Wetherspoon, 5.3 per cent higher, and Marston’s, which climbed 6.3 per cent.
Revolution Bars was also on the up, gaining 2.9 per cent, while Wagamama and Frankie & Benny’s owner The Restaurant Group rose 3.3 per cent.
The moves came as Sunak announced a major overhaul of alcohol duties and slashed taxes on draught beer and ciders.
Airlines were also on the rise after the Chancellor announced domestic flights will be subject to a 50 per cent cut in air passenger duty from April 2023. But the levy was increased on long haul.
Wizz Air picked up 44p at 4604p and British Airways owner IAG inched up 0.02p to 159.96p.
Housebuilders breathed a sigh of relief after a tax hike on the sector was no more than expected. Sunak confirmed a widely trailed 4 per cent property developer tax to fund a £5billion package to replace unsafe cladding in high-rise buildings in England.
Taylor Wimpey was up 4.05p at 1562p, Persimmon gained 44p at 2737p and Barratt climbed 8.2p to 675p.
But the banks failed to sparkle despite an 8 per cent surcharge on profits being cut to 3 per cent from 2023 to help level the playing field for the City when corporation tax goes up. The rate of corporation tax will rise from 19 per cent now to 25 per cent from April 2023.
Banks pay the surcharge on top of this and the cut will ensure the corporation tax rise does not leave them facing a higher tax burden than rivals in Europe.
Barclays was down 3.34p at 199.46p yesterday, Lloyds dropped 0.04p to 48.96p and NatWest lost 1.3p at 233p.
Investors also remained cautious over the prospect that interest rates could rise this year, potentially throttling the UK economic recovery and derailing Sunak’s plans. Laith Khalaf, head of investment at AJ Bell, said: ‘Inflation raised its head in the Budget speech pretty early on, and the Chancellor took the unusual step of using the despatch box to reaffirm the Bank of England’s inflation target.
‘The pressure is now cranking up on the [Bank’s] interest rate committee, because not only is inflation already above target, but the Chancellor’s now announced a further round of inflationary policies, such as increases to the minimum wage and public sector pay packets.
‘That now makes an interest rate rise this year even more likely.’