City unimpressed with budget announcement

Shares rallied on the surprise news that the Bank of England was cutting interest rates to 0.25 per cent to buffer the economy from the fast-spreading coronavirus.

Housebuilders were the biggest gainers with shares in York-based Persimmon and the other big firms all rising around 4 per cent. Banks also gained with Halifax’s owner Lloyds and the other big banks gaining around 2 per cent.

The FTSE 100 gained 1 per cent, recovering from a four-day slump fuelled by concerns about the fast-spreading virus and a rout in oil markets.

But at 12.30pm, the new Chancellor Rishi Sunak stood up to announce his first budget.

Whilst many were pleased with the £30bn coronavirus alleviation strategies and the much needed investment in the North, the city was pretty unimpressed with the gloomy five year GDP predictions and the removal of the pledge to cut corporation tax (it was supposed to fall from 19 per cent to 17 per cent next month) which will raise £6.4bn a year for the Government’s coffers. This will leave UK PLC with less money for investment and pay rises.

Neil Insull, a partner at tax advisory firm Blick Rothenberg, said: “The Chancellor has confirmed that the rate of corporation tax will remain at 19 per cent, but no promise of any future cut.

“Surely a missed opportunity to promise lower rates in the future given future projected budget surpluses.”

At the same time, growth forecasts have been revised down for three of the next four years and that’s before the damage that the coronavirus could cause.

The latest GDP forecasts show the UK faces five more years of weak growth.

The city was unimpressed and the FTSE 100 index closed down 1.4 per cent, not helped by a further fall in the Dow Jones, whilst Persimmon lost its early gains, closing down 1.3 per cent.

There were some bright sports for Yorkshire PLCs.

Owen Michaelson, CEO of Rotherham-based land regeneration firm Harworth Group, said: "We welcome a number of the announcements made by the Chancellor. The regions have a significant contribution to make in future-proofing our economy and improving the nation's productivity."

He welcomed commitments such as the significant investment in infrastructure, a £400m brownfield fund to support the development of new homes and a significant increase in research and development spending.

"We are also delighted that the Chancellor backs further devolution into the regions, including the long awaited West Yorkshire deal," he added.

Will Gardiner, Drax Group CEO, said: “The funding pledged for the development of two or more carbon capture and storage clusters demonstrates the Government’s commitment to communities and businesses in the North - ensuring the region is well placed to take advantage of new opportunities created by a decarbonising economy.

“By accelerating the development of vital negative emissions technologies like bioenergy with carbon capture and storage (BECCS), which is being pioneered by Drax, we can permanently remove millions of tonnes of CO2 each year from the atmosphere.

“The Humber is the UK’s most carbon intensive region and home to 55,000 jobs in manufacturing and other industries. Decarbonising the Humber would therefore have a major impact - delivering for the environment and the economy, securing jobs and a long-term future for businesses which could otherwise be left behind.”