Jeremy Hunt’s autumn statement is likely to leave at least a glimmer of a smile on the face of the average UK salary earner. They’ll now be pocketing an extra £450 from their annual pay packet due to a cut in National Insurance.
Pensioners were also dealt some relief from the cost-of-living crisis with the reassurance that the triple-lock will be honoured. The resulting 8.5% increase in the State Pension will stay in line with wage growth.
Jeremy Hunt announces tax cuts, State Pension triple-lock guarantee and a new lifetime pension
This won’t do any harm to companies dependent on the UK consumer. Just as well given the gloomier picture number 11 delivered on economic growth and inflation.
But in reality, we don’t think tinkering with the trillion-ish pounds that the government gets and spends each year, is enough to change the investment view for a given stock.
Here’s a look at some of the measures designed to give a helping hand to certain areas of the economy and what it might mean for businesses and investors.
This article isn’t personal advice. If you’re not sure an investment is right for you, ask for advice. Investments rise and fall in value, so you could get back less than you invest. Past performance isn’t a guide to the future.
Investing in an individual company isn’t right for everyone because if that company fails, you could lose your whole investment. If you cannot afford this, investing in a single company might not be right for you. You should make sure you understand the companies you’re investing in and their specific risks. You should also make sure any shares you own are part of a diversified portfolio.
Alcohol duty up in smoke and tobacco duty overflowing
Publicans are unimpressed with Jeremy Hunt hitting the stop button on the alcohol duty escalator. That’s only 3p less per pint that landlords will have to hand over to the Treasury, less than 1% of the average price at the taps.
It’s a tough market out there and pubs are closing at an alarming rate. However, JD Wetherspoon’s value offering is serving it well so far.
The group’s outperforming the market and could still grab more of the share. That and its improving financials have been recognised by a strong recovery in the valuation – this of course increases the risk of volatility if trading doesn’t meet expectations though.
Smokers weren’t offered the same respite with duty being hiked across all categories of tobacco. British American Tobacco’s global footprint will go some way to limit the impact of this on its profits.
But there have been calls for higher taxes in other territories too in a bid to cut down tobacco consumption. This uncertainty is reflected by a price-to-earnings ratio that’s well below the long-term average.
Sales of alternative products like vapes are growing quickly. We see an opportunity if these products can offset falling tobacco volumes, but be aware that the division is still currently loss-making.
The 9.7% dividend yield looks to be the main attraction for now. We think that looks appealing. But remember, yields are variable and no dividend is ever guaranteed. And key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
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What about housebuilding?
House prices might be falling, but until wages rise significantly, stepping onto the property ladder will stay out of reach for many.
A return of the help-to-buy scheme, or a similar support measure for first-time buyers, would have had a huge impact on the housing market. This would boost demand and bring back some welcomed stability for housebuilders.
But that wasn’t delivered in the autumn statement. Instead, the chancellor has pledged to allocate £450mn to the Local Authority Housing Fund to help deliver 2,400 new homes.
That’ll likely benefit some housebuilders, like Vistry, more than others but it’s not really going to move the dial much. Especially compared to the government’s target of building 300,000 new homes a year by the mid-2020s.
Without a step change reform to address the persistent planning backlog, it’s hard to see the UK’s current housing problem being resolved anytime soon.
What else was announced in the autumn statement?
Unless otherwise stated, estimates, including prospective yields, are a consensus of analyst forecasts provided by Refinitiv. These estimates aren’t a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.
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