Wednesday, 23 November: FTSE indices displayed no jitters ahead of Chancellor Hammond’s Autumn Statement, trading in the green. However, gains were soon pared back following a string of budget announcements. Major casualties of the day were house builders and real estate shares, as confirmation was received that letting agent fees will be abolished, a strong rumour before the announcement. This saw Foxtons slip 13.44%, as Countrywide was also 5.47% lower. Other house builders were 2-3% lower. The FTSE 100 closed 0.03% lower, as the FTSE 250 was 0.32% lower.
As the statement was delivered, Hammond praised the strength and resilience of the economy, along with a raft of fiscal measures to improve infrastructure and ease pressure on the coffers as the OBR delivered its revised projections in the wake of the EU referendum. The independent budget watchdog trimmed its 2017 growth figure to 1.4% from 2.2% in March and its 2018 forecast to 1.7% from 2.1%, with a climb to c.2% growth thereafter.
Consequently, weaker GDP growth brings with it lower tax revenues, therefore Mr Hammond announced the government would borrow a further £122bn over the five years to 2021, whilst abandoning his predecessor’s goal of balancing the budget by 2020. However, two new policy guidelines were introduced, citing the budget deficit should be below 2% of economic output by that time, and the government’s stock of debt should be falling as a share of output.
The headline-grabber was the new infrastructure fund initiative, in part with the creation of a £23bn National Productivity Investment Fund to utilise over the next five years. Beginning 2020, the Chancellor envisaged government investment spending at between 1% and 2% of economic output a year, up from 0.8% now.
Although austerity favoured by former Treasury Chief Osborne was quashed, the new chief was still keen to fill the government coffers by taking an easy win from the middle classes. This saw a ‘benefits-in-kind’ loophole closed, (i.e gym memberships) without paying the same rates that workers would on a cash salary. There were also further efforts to clamp down on tax avoidance schemes, though plans to reduce corporation tax to 17% by 2020 were reaffirmed.
Elsewhere, Thomas Cook closed 6.73% as investors re-appraised the tour operator as it turned its dividend back on, after the first time in five years following a trading year in the shadows of terrorist attacks and political uncertainty.