Philip Hammond made his first Spring Budget announcement today in his role as Chancellor of the Exchequer, the role he has occupied since June last year. No big changes for those investing online were announced in his inaugural Autumn budget, unlike previous years when changes to ISA and SIPP allowances and cuts to tax breaks for buy-to-let landlords have been communicated.
However, it did contain some good news for higher net worth investors with the surprise news that the annual EIS (Enterprise Investment Scheme designed to encourage private investment in promising young British companies) investment ceiling was being raised to £2 million from £1 million. While the increase contained caveats the tightened rules on the companies that qualified for the scheme it was positive against the backdrop cuts had actually been expected.So, did today’s announcement contain any similar titbits or anything even more exciting? In a word, no. While changes to government-backed investment wrappers and other investment incentives and tax breaks are usually reserved for the Autumn Budget announcement, the Spring instalment can occasionally throw up surprises. Not this year though. From the point of view of those investing online in ISAs and SIPPs, there was, however, some positive news around the economy.
In November the Office for Budget Responsibility had revised 2018 growth forecasts down slightly, to 1.4% from 1.5%. It was announced today that an acceleration of the economy during the intervening months has allowed that downward revision to be reversed back to 1.5%. Employment was also announced as having increased by 3 million since 2010 and is currently at close to a 40-year low.
While there is no guarantee that the UK economy won’t still take a downward trajectory over the next few years under Brexit pressure, today’s positive news is another sign that more pessimistic forecasts are thus far being proven wrong. It was also announced that against the backdrop of the first sustained drop in the UK’s national deficit in 17 years public spending is likely to be increased from next year if the same trajectory is sustained. Those investing online might want to keep their eye on companies that might benefit from loosened public purse strings such as infrastructure-focused construction companies and those selling into public utilities and services.
A £44 billion investment programme to increase new housing supply to 300,000 a year by the mid-2020s was also announced. That could benefit listed house builders, though could also take some steam out of the housing market by increasing supply, keeping sales prices from running higher, which has a positive impact on their profit margins.
Finally, while not directly investment related, the part of the Budget announcement likely to get the most publicity was around the Brexit exit bill. Chancellor Hammond intimated it is expected to come in at around £37.1 billion and be paid in small instalments up until 2064.