The UK budget will be announced today: sterling loses ground, UK100 FTSE makes slight gains.
UK Chancellor, George Osborne will announce the budget at 12.30pm GMT, Wednesday. Pre-budget, sterling was at a loss to find ground against other currencies on Tuesday and the UK100 FTSE gained 0.2% at trade opening.
The “no gimmicks, no giveaways” budget, a phrase coined by Osborne, is however expected to give British oil companies a helping hand by reducing the high tax, which was increased to cover the oil price when it was at a level of $111 per barrel. The tax at present for companies such as BP stands at 60-80% above many other industries. With oil now at levels of $44.59 per barrel, this extreme tax is no longer relevant. The Guardian newspaper reported Danny Alexander, chief secretary to the Treasury, as telling the BBC recently: “We’ve been very clear that the direction of travel for tax in the North Sea needs to be downwards.”
BP rose 0.72% on the New York Stock Exchange and up by 0.36% on the UK exchange with a BUY signal.
Other stocks on the radar of the British Chancellor are those who are seen as ‘tax avoiders’. These are companies who generate profits in the UK and move them abroad to avoid the UK tax system. In the Autumn statement, the so-called ‘Google-tax’ was implemented on companies including Google, Amazon and Starbucks, charging them 5% more than the UK corporation tax rate of 20%. Legislation for the tax is expected to expand and appear in the budget announcement.
GBP fell at opening of trade against the euro and the U.S dollar, but with inflation in the UK hitting a record low of 0.3% the fall-out will be lower payments by the government on index-linked debt and lower increases on certain benefits. Alongside other benefits of low inflation, the result is that the government will receive a 6 billion GBP windfall and predictions of borrowing for the current fiscal year ending in April 2015 will be approximately 89 billion GBP
MT4 Chart: BP
MT4 Chart: UK100 [FTSE]
Trade stock CFDs on STOCK.com with full training given to all clients