Rishi Sunak’s second stimulus package boosts shares

Housing market and hospitality sector shares have been given a boost as the government revealed the second stage of their economic response.

Article updated: 9 July 2020 10:00am Author: Ian Forrest

Chancellor Rishi Sunak today announced the second stage in the government’s economic response to the Covid-19 pandemic.

One particular concern has been the prospect of the furlough scheme coming to an end in October, with many people worried that they may find themselves becoming unemployed. The chancellor’s decision to reward employers who decide to retain staff with a £1,000 Jobs Retention Bonus is sensible, although it only asks for them to be kept on until January which seems a little short term. The proposal is good news for investors in sectors such as hospitality and tourism, as they have been more heavily impacted than others.
That is also true of the measures to support younger people through the Kickstart scheme, with under 25s more likely to work in sectors most impacted by lockdown. The focus on supporting trainees and apprenticeships is a sensible long term move as it is especially important to enable younger people to get into work as soon as possible.

There were notable measures affecting the green economy and the housing sector with a new £2bn voucher scheme to enable homeowners to make their houses more efficient.

The VAT cut for the tourism and hospitality sectors and the government-funded Eat Out to Help Out voucher for August is also good news for investors, with shares in those sectors rising on the news. Although it is just for a month and doesn’t apply at weekends, the measure should still benefit the hard hit restaurant sector as it begins to reopen and at a time when many people are on holiday.

So overall it’s a good package of measures spreading government support across many sectors, but with a focus on some of the hardest hit. The support for employees returning from furlough, around 9 million people, is the most important and much depends on how successful that is in reducing the level of redundancies from October onwards. All eyes now will be on the Budget and spending review in the Autumn but, despite the scale of government borrowing, it is difficult to see the scope for much in the way of austerity given the economic background.

All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.

Ian Forrest portrait photo
Ian Forrest

Investment Research Analyst

Ian’s background in investments, financial journalism and research has seen him advising private investors on equities and helping to manage portfolios. His qualifications include the Certificate in Financial Planning and the Chartered Institute for Securities & Investment’s Investment Advice Diploma.

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