Proactive Investors -
- Lead index up 3 points at 7,644.
- Gold hits an all-time high.
- Service sector sees strong February.
National insurance will be cut but income tax left unchanged in budget
National insurance will reportedly be cut by 2% in Wednesday’s Spring Budget, but Chancellor Jeremy Hunt will leave income taxes unchanged.
According to Telegraph-cited government sources, such a cut to income tax was deemed by Hunt to be too expensive, given the potential knock-on effects to inflation.
However, the reduction in national insurance will likely save the average UK worker £450 a year, stretching to £900 when combined with last autumn’s cut, which came into effect in January.
The latest cut will take effect in April, next month, and comes as the government looks to offer giveaways in what is likely to be its final budget before the next general election.
Close Brothers calls for incentives to boost EV sales in Spring Budget
Flagging private demand for electric vehicles has prompted merchant bank Close Brothers to call for incentives for consumers in Wednesday’s Spring Budget.
Battery electric vehicle registrations increased by 22% to 14,991 in February, Society of Motor Manufacturers and Traders (SMMT) data showed on Tuesday, against a wider 14% uptick in car sales over the month.
However, such growth was dominated by firms buying cars for their fleets, with fewer than one in five new EVs being bought privately.
“While battery EV market share and volumes continue to grow during the first year of mandated targets for manufacturers, the increase in uptake is entirely sustained by fleets, thanks to compelling fiscal incentives,” the industry body said.
Close Brothers Motor Finance director Lisa Watson noted muted demand put government targets for 22% of cars sold in the UK this year to be electric in jeopardy.
Just 12% of private new car buyers now consider electric models, down from 14% a year ago, Watson said, citing Close Brothers’ research.
“Both consumers and manufacturers will be hoping that the government’s spring statement will address concerns surrounding EV uptake, such as inadequate infrastructure, and contain incentives to encourage widespread EV adoption,” she added.
Service sector enjoys strong February
Britain’s service sector enjoyed a “sustained increase” in business activity during February, boosted by rising employment and new orders, S&P Global has reported.
At 53.8, S&P Global’s seasonally adjusted purchasing managers' index (PMI) reading for February was down on the 54.3 recorded in January.
This was higher than at any time in the second half of 2023 though, the financial information firm noted, when the UK slipped into technical recession.
"Another solid expansion of business activity across the service sector in February adds to signs that the UK economy has turned a corner after entering a technical recession,” S&P director Tim Moore said.
New orders buoyed the figures, with service providers reporting the fastest order book growth since May last year.
Staffing rates increased, though modestly as per S&P, by the fastest rate since July last year, meanwhile.
“A turnaround in customer demand and the prospect of interest cuts on the horizon helped to boost business optimism across the service economy,” Moore added.
That said, higher shipping and salary costs meant input price growth was at its highest in five months, adding to “signs of robust domestic inflationary pressures,” as per Moore.
China sets targets to reignite flagging economy
China’s premier Li Qiang has unveiled an ambitious 5% gross domestic product (GDP) growth target for the upcoming year, as the country looks to reignite its economy.
Speaking at the National People's Congress on Tuesday, he emphasised the need to boost consumer spending, after growth since the pandemic has been muted.
Qiang unveiled a range of measures aimed at stimulating the economy, including targets to add 12 million jobs in rural areas, new schemes to reverse China’s property crisis, funding for research in the likes of artificial intelligence and further regulation of financial markets.
Some 1 trillion yuan (or £110 billion) in “ultralong special treasury bonds” will also be issued in 2024 and beyond, he said.
Defence spending, which is closely watched internationally given China’s tensions with Taiwan, will be increased by 7.2% over the year, meanwhile.
“We should communicate policies to the public in a well-targeted way to create a stable, transparent and predictable policy environment,” Qiang added.
Ashtead (LON:AHT) leads fallers after outlook caution
Ashtead PLC led the FTSE 100 lower in early trading after warning slow third-quarter trading meant revenue growth would be at the bottom end of expectations for the year.
Rental revenue growth in North America was constrained by longer-than-expected strikes by actors and writers, the industrial equipment rental firm said in an update, alongside lower emergency response activity to natural disasters.
As a result, full-year rental revenue growth will likely sit at the lower end of the 11% to 13% guided range.
Revenue for the three months to January climbed by 9% to US$2.7 billion meanwhile, Ashtead added, though operating profit slipped 3% to US$591 million.
Shares slipped 7.7% to 5.286p.