Market News & Analysis
UK Coronavirus Budget - Will It Go Far Enough?
Fiona Cincotta March 11, 2020 12:32 AM
Coronavirus is expected to cause a slowdown in demand amid increased worker isolation and/or illness meaning firms’ cashflow could take a hit. Keeping smaller firms afloat will be a key focus as will safeguarding the fragile recovery in business confidence since the election.
There is growing speculation that the BoE could announce stimulus in coordination with the Budget. Incoming BoE Governor said last week that here should be a coordinate response. We don’t expect this to happen firstly because it raises questions over the central banks’ independence. Secondly, because Andrew Bailey also said that he would prefer more evidence before taking a decision to cut rates. This makes us believe that the BoE will wait until the meeting at the end of the month, or potentially longer.
The pound has held up reasonably well amid the coronavirus outbreak in part because of the calm approach from the BoE and in part amid expectation of firm supportive fiscal policies from the Government. The pound could take a hit if the market believes that the budget doesn’t go far enough in tackling coronavirus or limiting its economic impact. Under these circumstances we could see GBP/USD head back towards $1.28. Otherwise the pound is expected to remain stable around the $1.30 until we hear more from BoE.
Business rates will be a key theme given the dire state of the UK retail sector and the massive disadvantage that stores with a large footprint endure. Attempts to level up the playing field for bricks and mortar retailers versus the online competition could see these stocks jump. As an example, Tesco pays £700 million in business rates every year. Rate relief details will be scrutinised closely.
With Help to buy due to come to an end in 3 years’ time, investors will be keen to see what else the government has up their sleeve to help the sector. 300,000 homes a year by 2025 or shifting stamp duty to sellers will hoped for. However, given that the government is looking to build more houses and stabilise prices construction material firms could see more upside than housebuilders, given that the latter looks for hour price increases for improved margins.
From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.
As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.