21st Jul 2022 14:04
(Alliance News) - A UK government led by Rishi Sunak will be good news for pharmaceutical firms, while Liz Truss could lift retail share prices with her plan to cut personal income taxes, analysts at Brewin Dolphin said on Thursday, after the race to Number 10 was whittled down to two.
Conservative rivals Sunak and Truss, offering competing answers to Britain's multiple crises, will duel in the coming weeks to become the next prime minister after the ruling party's lawmakers held a concluding vote Wednesday.
Up until a matter of weeks ago, Sunak was the chancellor of the exchequer, heading up the nations finances. He stepped down shortly before Prime Minister Boris Johnson said he would resign. Truss remains the foreign secretary, meanwhile.
Despite sharing a cabinet, one of their biggest policy differences is on tax. Sunak would prefer to get inflation under control before cutting taxes, while Truss wants to lower it immediately.
Brewin Dolphin analyst Rob Burgeman commented: "On one side we have Rishi Sunak, who after two years as chancellor of the exchequer, has given the City a flavour of how he might look to run the country. He is widely considered to be fiscally conservative and takes the challenges posed by high inflation very seriously.
"On the other side, Liz Truss wants to cut taxes and deal with inflation at a later date."
Sunak's plans will be "good news" for consultancy firms, including the likes of Accenture PLC and Capgemini SE, Burgeman said. These firms are often who government departments turn to when they need advice on cuts and transformation projects.
"It could also be a relatively good period for the insolvency profession, at least in the short term, as rising interest rates mean debt is more expensive and more companies go to the wall. Begbies Traynor and FRP Advisory are two London-listed, UK-focussed practitioners that could find their services in high demand," the Brewin Dolphin analyst added.
Burgeman added that Sunak has been a supporter of research and development. Were this to continue if he got the keys to 10 Downing Street, it would be helpful for London-listed pharmaceutical firms GSK PLC and AstraZeneca PLC.
Tech-focused industrial firms, including precision instrument supplier Spectris PLC and engineering firm IMI PLC also could get a boost from a Sunak premiership.
Consumer-facing stocks would be the initial beneficiaries of a Truss-led government, meanwhile.
"Truss wants to cut taxes and deal with inflation at a later date. If she is to win, then the short-term picture may be rosier for retailers such as Next, as consumers see the benefit of a bump to their pay packets. Next is a great company in a difficult environment, but any boost to consumer sentiment would be good news for it," Brewin's Burgeman said.
The Brewin analyst said Truss may also look to infrastructure to boost growth, benefiting the likes of CRH PLC and Balfour Beatty PLC.
A failure to contain inflation from the off could mean financial stocks such as Barclays PLC get a lift from rising interest rates under a Truss government.
"However, not dealing with inflation now means it is likely to be more difficult to bring back down later. That is usually bad news for bonds, the value of which are gradually eroded by inflation, if it is persistent," Burgeman added.
By Eric Cunha; [email protected]
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