Sunday 22 September 2019

London market struggles as Budget pledges hit housing stocks

The FTSE 100 Index closed up 7.68 points to 7,419.02.


By Ben Woods, Press Association Chief City Correspondent

Britain’s housebuilders dragged on the top-flight index after investors took a dim view of the Government’s Budget pledges to rejuvenate the housing market.

The FTSE 100 Index closed up 7.68 points to 7,419.02, as London-listed housing giants dominated the biggest fallers on the market, with Barratt Developments sinking more than 3%, or 23.5p to 610p.

Chancellor Philip Hammond vowed to abolish stamp duty for first-time buyers on properties up to £300,000, while also warning that the Government would intervene if companies fail to take advantage of planning permission and sit on unused land.

However, Britain’s fiscal watchdog took the shine off the stamp duty pledge, predicting it will push up prices by around 0.3%, leaving many first-time buyers paying more than they would have done without the relief.

The package of housing reforms sent Berkeley Group and Persimmon sinking 98p to 3,657p and 51p to 2,624p respectively.

Connor Campbell, financial analyst at SpreadEx, said: “Hammond pledged £44 billion for housing investment over the next five years, and stated by the mid-2020s the UK should be building 300,000 homes a year.

“One would expect, however, all this to be a boost to the house-building stocks.

“Yet the threat that councils will potentially be able to compulsorily purchase parcels of land that are being sat on by developers for marketable, rather than technical, reasons has sent the sector lower.”

Across Europe, the French Cac 40 dropped by 0.2%, while the Germany’s Dax slumped by 1.2%.

On the currency markets, sterling proved resilient to the Budget forecasts which delivered swingeing cuts to Britain’s economic outlook.

The pound was up 0.4% versus the greenback at 1.328, with the lion’s share of the growth coming from US dollar weakness.

The UK currency was also marginally higher versus the euro, despite Britain’s fiscal watchdog slashing the outlook for UK gross domestic product (GDP) in response to lacklustre productivity growth and business investment.

In its independent forecasts, the Office for Budget Responsibility (OBR) downgraded gross domestic product forecasts (GDP) from 2% to 1.5% for this year.

It also cut the GDP outlook from 1.6% to 1.4% in 2018, from 1.7% to 1.3% in 2019, from 1.9% to 1.3% in 2020, and from 2% to 1.5% in 2021, before expanding by 1.6% in 2022.

Kathleen Brooks, a research director at City Index, said Mr Hammond managed to “shift the market attention away from the horrible GDP forecasts”.

“Overall, he did a good job and managed to pull a couple of rabbits out of his hat that increases the image of his competent leadership of the UK Treasury, even with the lower GDP forecasts.”

In oil, Brent crude prices rose 0.4% to $63.01 per barrel, after the US Energy Information Administration released data showing a drop in crude inventories.

Focusing on UK stocks, shares in Royal Bank of Scotland slipped more than 1% as the Government dusted off plans to re-privatise the taxpayer-backed lender.

Among the Budget announcements, the Government said it plans to restart share sales in RBS by the end of the 2018-19 financial year and sell off £3 billion a year over five years – around two-thirds of its 72% stake.

Shares were down 3.7p to 269.5p.

Thomas Cook was among the biggest fallers on the second tier after it revealed a 40% plunge in UK earnings as it suffered amid “challenging” trading and a hit from the weak pound.

The holiday giant reported underlying earnings of £52 million for the UK division in the year to September 30, down from £86 million the previous year after it was knocked by rising hotel prices, the pound and intense competition in the Spanish market.

The firm sunk more than 8%, or 10.2p to 111.5p.

The biggest risers on the FTSE 100 Index risers were Kingfisher up 14.1p to 322.6p, Fresnillo up 56p to 1,349p, Shire up 120p to 3,752p, Standard Chartered up 21.1p to 744.1p.

The biggest fallers were Barratt Developments down 23.5p to 610p, Berkeley Group down 98p to 3,657p, Paddy Power Betfair down 200p to 8,540p, Prudential down 38p to 1,877p, Persimmon down 51p to 2,624p.

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