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Pubs raise a glass to rates and duty cuts in Budget

Hard-pressed pubs and the wider hospitality sector were among the main winners from chancellor Rishi Sunak’s third budget as they were served up some notable giveaways.
The wider market had a pretty muted reaction to the statement which contained relatively few surprises after several key items were trailed in advance. The FTSE 100 was broadly unchanged, although there were gains for the more domestic-facing FTSE 250.
An improvement in the OBR’s (Office for Budget Responsibility) economic forecasts also helped give the pound a modest lift against the dollar. The OBR has lifted its GDP forecast for 2021 from 4% in March to 6.5% and the estimate for long-term scarring on the economy was revised down from 3% to 2%.
Sunak also offered the latest hint that a rate increase could be coming soon as he confirmed he’d written to the Bank of England to give them a nudge on their remit of ‘achieving low and stable inflation’.
However James Antwis, analyst at HSBC Asset Management, said: ‘The combination of higher rates and premature fiscal tightening could jeopardise the recovery and this means that today’s budget should provide food for thought for the MPC ahead of next week’s policy meeting, and throws doubt on whether the Bank can raise rates as quickly as markets are currently pricing.’
Pubs benefited from a new ‘draught relief’, a 5% cut on duty on draught beer and cider, and were one of several industries to get a boost from a 50% cut on business rates (up to a maximum of £100,000) for retail, hospitality and leisure companies.
Shares in pubs groups JD Wetherspoon (JDW) gained 5.5% to £10.41, Mitchells & Butlers (MAB) to 3.2% to 254.6p and Marston’s (MARS) were up 3.9% to more than 80p. Gym operator Gym Group (GYM) ticked 0.6% higher to 265p on the news.
The obvious losers were in the banking sector where despite the expected cut in the corporation tax surcharge from 8% to 3% in 2023 the industry still faced an increase in corporation tax from 27% to 28% that year – ahead of the rates paid by other companies. Barclays (BARC) fell 1.5% to 199.7p.
UK-listed airlines largely shrugged off a cut to passenger duty on domestic flights, reflecting their greater focus on international travel.
Buried in the small print was news that the still quite generous ISA allowance will remain frozen through the 2022/2023 tax year at £20,000 along with the £9,000 limit on Junior ISAs and the £5,000 starting rate at which you start to pay tax on the interest earned on savings.
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