Three UK sectors are likely to be most affected by the chancellor’s Autumn Statement, according to fund managers.
Services companies
Statistics from the Office for Budget Responsibility predict the cuts needed to meet the government’s targets will mean public spending falls to a level not seen in 80 years.
In such an environment, Richard Buxton, manager of the £1.5bn Old Mutual UK Alpha fund, said he was eyeing service-based companies, expecting them to benefit from the government’s cuts to departmental budgets.
In anticipation of this, Mr Buxton has started to buy a position in G4S, the largest security and outsourcing company in the UK, which could be called upon amid the expected shrinking of the state.
On a similar theme, Mr Buxton has been watching Serco but said he would observe the company even more closely now following the Autumn Statement.
According to Serco’s own website, it “helps governments and corporations across the world deliver better services for less”, something a UK government is likely to want.
Housebuilders
The housing sector has long been a pillar of the UK economy but recent government schemes, such as Help to Buy, have fanned the flames of an overheated housing market.
This has inevitably driven up the shares of housebuilders and associated businesses, but following the Autumn Statement some think the sector could once again be turbocharged.
With the chancellor’s move to reform stamp duty, which, in his words, cuts the amount liable for 98 per cent of people who pay it, further rises are now expected.
Colin Morton, portfolio manager on the UK equity team at Franklin Templeton, expected the “biggest effect by far” to be on housebuilders and housing-related stocks.
Mr Morton holds two housebuilders – Bovis Homes and Bellway – that he said had risen after the chancellor’s statement. He also expected Howden Joinery, a kitchen supplier, to perform well.
“Since people won’t have to pay as much in [stamp duty] they can spend more on things like kitchens,” he said.
Banks
The banks were one sector that did not benefit from the Autumn Statement.
Perhaps they were an inevitable target given Mr Osborne had to respond to claims from the Labour party that big business was not paying its fair share to help the country balance its books.
The chancellor landed the banks with a £3.5bn tax bill, which will be accrued across the next parliament, by reducing to 50 per cent the amount of profit they can offset against losses incurred in the financial crisis.
Such accounting is used, legally, by banks to mitigate their tax bills but Mr Osborne has curbed this.
Shares in the main UK banks – RBS, Lloyds Banking Group, Barclays and HSBC – all fell slightly after the changes were announced, according to data from FE Analytics.
Martin Cholwill, manager of the £1.5bn Royal London UK Equity Income fund, said he had long been sceptical of banks given they were vulnerable to political intervention, although he did not expect the chancellor’s announcement to lead to a full-scale deterioration in their share prices.
