Thursday, 17 March am: Markets in the UK remained relatively calm in Wednesday morning trading as investors awaited George Osborne’s 2016 Budget. Before that though, the Office for National Statistics released UK unemployment data, showing that between November and January, unemployment in the UK fell to 1.68 million, down 28,000 from the previous quarter. The rate of unemployment remained at 5.1% – maintaining the stats at a 10 year record low. Regionally, the North East of England saw unemployment fall by 11,000 but the region still has the highest rate of unemployment, at 7.8%.
Moving on to the Budget. The biggest surprise to come from Osborne was the introduction of a sugar tax of soft drinks (to be introduced in the next two years), with the money raised to be spent on doubling funding for sport in primary schools. The sugar tax will raise an estimated £520m a year, but companies have been given two years to adapt products to reduce their sugar content. The immediate impact of this part of the budget was felt by Barr, Britivic and Tate & Lyle as all three stock immediately fell by c.5%, whilst TV chef Jamie Oliver celebrated the news after campaigning for such a tax in recent years.
Elsewhere, the personal allowance has been increased from £11,000 to £11,500 from April 2017. The rate at which workers will start paying 40% tax is to be raised from £42,385 to £45,000 from April 2017, whilst corporation tax is to be cut to 17% by April 2020. For the savers amongst us, a new “Lifetime ISA” will be launched in April 2017 for individuals under the age of 40 to buy a home or a pension. Savers will received a 25% bonus from the government, with a maximum of £4,000 (gross) to be saved a year (a maximum annual bonus of up to £1,000 per annum until the age of 50). For those wishing to use the Lifetime ISA to buy a house, they will be able to do so after one year, whilst those wanting to use it for retirement will have to wait till they turn 60. Alongside this, ISA allowances have been increased from £15,240 to £20,000. There are no rules preventing individuals from having both a life time ISA and a standard ISA, up to the £20,000 limit.
With motorists still reaping the benefits of lower oil prices, Osborne froze fuel duty for the 6th year in a row. Those who enjoy an alcoholic beverage on the weekend (or even a week night, no-one’s judging) have also benefitted from frozen duties on beer, cider and spirits. For the smokers though, excise duties on tobacco is set to rise by 2% above inflation.
Elsewhere, after European trading had closed for the day, the US Federal Reserve concluded their latest two-day policy meeting by announcing they are to leave interest rates as they are at between 0.25% – 0.5% (as expected). The indications is for two rate hikes over the course of 2016, down from the four rate hikes they initially suggested when they raised rates in December. The committee highlighted global uncertainty continuing to pose a risk with the Fed Chair Janet Yellen warning that caution is “still appropriate for now”.