The UK Stocks to Watch Ahead of Chancellor Hunt’s Spring Budget

Joe Easton and Kit Rees
·4 min read
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(Bloomberg) -- When UK Chancellor Jeremy Hunt delivers his spring budget on Wednesday, investors in the country’s homebuilders, retailers and investment platforms will be watching with a sense of anticipation.

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The stocks are among those that analysts see as most likely to benefit from any potential giveaways aimed at boosting the political fortunes of the ruling Conservative party ahead of a general election expected later this year.

“It is a pre-election budget, so I suspect he’s going to try and deliver something,” said Simon Gergel, chief investment officer for UK equities at Allianz Global Investors. “There’s been some talk of tax cuts or national insurance cuts, which could be taken quite well for the consumer.”

Such reductions would be a boost to the likes of Marks & Spencer Group Plc and EasyJet Plc, while a plan to create a so-called British ISA, a tax-free savings account for investing in UK equities, would be seen as a positive for the likes of Taylor Wimpey Plc and Hargreaves Lansdown Plc. It would also provide a broader lift to London’s shrinking stock market, after a slew of companies moved their listings away from the UK.

“Changes to improve the UK equity market would enhance economic growth and improve savings and tax generation — a win:win scenario,” said Charles Hall, head of research at broker Peel Hunt.

On the flipside, shareholders of North Sea oil companies and vaping firms are more likely to watch Hunt’s announcements with a sense of trepidation.

Below, we look at which sectors and companies stand to gain or lose out.

Read: Beaten-Down UK Stocks Are Seen as a Contrarian Bet: Taking Stock

Retail and Leisure

Retail and leisure shares will be in focus if Hunt succumbs to pressure from many in the Conservative Party to cut the UK’s tax burden. The Telegraph newspaper reported last month that he’s already deemed a plan to cut the basic rate to 18% from 20% unaffordable.

Hunt’s other options are raising the personal allowance or cutting national insurance, Deutsche Bank AG economist Sanjay Raja wrote in a note.

  • Watch Marks & Spencer, EasyJet, Jet2 Plc, On the Beach Group Plc

Housebuilders

Hunt may introduce measures to help first-time buyers get on the housing ladder, according to Raja, which would give a boost to homebuilders. It’s also “very possible” that the Chancellor makes permanent the stamp duty cut previously announced by his predecessor in September 2022, Raja said.

  • Watch Taylor Wimpey Plc, Persimmon Plc

Investment Platforms

Hunt has said he is “very attracted” to the idea of creating a British ISA as part of efforts to boost the UK’s struggling stock market, which has been beset by underperformance, outflows and an exodus of companies. ISAs, or Individual Savings Accounts, currently offer tax-exempt savings up to a limit of £20,000 ($25,250).

The measure could give a broad boost to British shares by directing people’s savings more toward the UK, according to Tim Lucas, UK Equity Income portfolio manager at Newton Investment Management. It may also benefit the firms that provide ISAs.

  • Watch Hargreaves Lansdown Plc, AJ Bell Plc

NatWest

Hunt is widely expected to confirm the sale of the state’s shares in lender NatWest Group Plc to retail investors. The government became the bank’s biggest shareholder during the 2008 financial crisis and has been gradually reducing its stake. It wants to offer at least some of its remaining 33% holding to the general public.

A retail placement of the stock will likely come at a “sizable discount” to the market price, currently around £2.47 per share, according to Gary Greenwood, an analyst at Shore Capital.

Normally, that would be a negative sign for a stock “but, in this case, it could be positive because it will increase the free float and mean index funds will be forced to buy and other funds may also need to do so for risk management purposes,” Greenwood said.

Oil and Gas

Hunt is weighing proposals to extend the UK’s windfall tax on the profits of oil and gas companies as one of several revenue-raising options under consideration to help finance personal tax cuts.

Extending the energy profits levy, a 35% charge which is due to expire in March 2028, is on a list of possible measures being reviewed by the finance minister, according to people familiar with the matter. Such a measure would likely hit smaller North Sea oil companies hardest.

  • Watch Harbour Energy Plc, Serica Energy Plc

Vapes

Hunt may announce a new UK tax on vapes as part of his budget, Bloomberg reported. The levy — which could raise £500 million ($630 million) for the public purse by 2028-29 — would apply to both manufacturers and importers and is being considered as part of Prime Minister Rishi Sunak’s efforts to crack down on vaping and smoking to protect children’s health.

  • Watch Imperial Brands Plc, British American Tobacco Plc

--With assistance from Joe Mayes, William Shaw, Alex Wickham, Michael Msika and Alexandra Muller.

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