26th May 2022 14:06
(Alliance News) - London-listed retailers surged on Thursday after UK Chancellor Rishi Sunak set out a GBP15 billion plan to help households cope with a crippling cost of living crisis.
The expectation of greater disposable income gave high street outfits and supermarket names a boost. However, utility providers were the biggest losers, with British Gas owner Centrica PLC among those moving lower.
Millions of UK households will get a GBP400 discount off their energy bills and a GBP5 billion tax will be levied on oil and gas firms as the UK moves to counter the soaring cost of living.
The chancellor unveiled emergency measures as part of a GBP15 billion package to tackle the impact of rampant inflation, which has reached a 40-year high.
AJ Bell analyst Russ Mould commented: "As the public clamour for someone, somewhere to do something grows, it is therefore not surprising that the government's latest policy U-turn should focus on a windfall tax.
"A windfall tax and targeted support for those that need it the most looks like good politics and it may provide economic relief too, in the near term."
Shares in BP PLC and Shell PLC, among those targeted by those that have long been in favour of windfall tax plans, briefly fell after the announcement but gathered poise thereafter.
Hargreaves Lansdown analyst Susannah Streeter explained: "As Chancellor Rishi Sunak perfected his U-turn on a windfall tax, the share prices of BP and Shell also looped lower, before climbing back up, as investors shrugged off its impact given that it is expected to be a short lived hit."
Shell shares were 1.0% higher at 2,402.00 pence each in London on Thursday morning, but had fallen as low as 2,388.00p in the wake of the announcement. BP was up 0.8% at 431.25p, but had fallen to an intraday low of 427.70p.
"It may mean dividends are pushed lower temporarily, but given that tax will reduce if companies invest more, it’s likely to mean an acceleration of investment by BP and Shell, a strategy which will be welcomed by many investors who see environmental progress and not just shareholder pay-outs as crucial for their long term growth prospects," HL's Streeter said.
While the market appeared to change its mind on how this affects oil majors, it was firm in its belief that retailers will benefit.
Ocado Group PLC shares shot up 6.8% to 821.80p. Next PLC climbed 4.4% to 6,398.00p and Tesco PLC rose 1.6% to 259.30p.
Even JD Sports Fashion PLC, whose shares have faced selling pressure after Executive Chair Peter Cowgill stepped down, was edging closer to the green. The stock was down 0.5% at 111.50p, but had been down around 4% earlier in the session.
Streeter explained: "Putting hundreds of pounds back in the purses of hard pressed consumers has also helped lift shares in retailers, which have been sliding over the feared repercussions of the cost-of-living crisis."
The likes of SSE PLC and Centrica were by far and away the biggest losers, meanwhile.
SSE was trading down around session lows, down 3.6% at 1,799.50p. Centrica was down 2.8% at 82.92p.
Elsewhere in London, sofa seller Made.com Group PLC rose 7.3%, also boosted by the prospect of greater consumer spending. More help for consumers could mean holidays are not put off, On the Beach Group PLC added 4.4% as a result.
In hospitality, Wagamama owner Restaurant Group PLC rose 2.5%, pub operator Marston's PLC climbed 4.8%, though Hostmore PLC fell 14%. The owner of the Fridays American dining chain did not receive a windfall tax-induced share price lift, it had earlier warned on its margins.
By Eric Cunha; [email protected]
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