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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

UK budget preview: what to expect

This will be the first budget from the Conservatives since they won a majority last year, the first since declaring austerity was over, and the first since the UK left the EU. We outline what it could mean for sterling and stocks.

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When is the UK budget?

The UK Chancellor of the Exchequer, Rishi Sunak, will deliver the Budget on 11 March 2020.

New budget with a new chancellor

Sajid Javid resigned as chancellor when UK Prime Minister Boris Johnson reshuffled his cabinet in February. He said he had to quit after the prime minister’s office asked him to sack his team of aides and replace them with those with closer ties to Number 10, which he said was a request ‘no self-respecting minister’ could agree to. Javid’s job as chancellor was safe considering it was just weeks to go before the budget, but he left the office having never delivered one.

This paved the way for Rishi Sunak, who was willing to tighten ties between Number 10 and the Treasury, to takeover. As chief secretary to the Treasury, he was already privy to the chancellor’s budget, making him the ideal candidate to take the reins at short notice.

Sunak is younger and less experienced than his predecessor, but has rapidly risen through the ranks since being elected in Richmond, Yorkshire, in 2015. He is a great fit for the cabinet considering he has consistently backed the prime minister, is a Brexiteer, and represents a constituency from up north, which fits in with the government’s ‘levelling up’ plan after securing the support of northern voters. Plus, he is clearly willing to follow the prime minister’s orders and tighten relations between the two most powerful roles in government.

The question now is whether the new chancellor will stick to the plans outlined by Javid, who was looking to boost investment in infrastructure while keeping a lid on day-to-day costs. Alternatively, closer ties between Number 10 and 11 may deliver a more decisive and ambitious budget in 2020. The mission up to now has been not to fund day-to-day spending by borrowing but, with such a large majority and an ambitious post-Brexit vision to deliver, we will find out how far the government is willing to open up the public purse.

What to expect from the 2020 budget

The budget is a major political and economic event that will have far-reaching effects on financial markets. It will spur movements in the pound and drive the share prices of stocks in an array of sectors higher or lower as investors factor-in any new policies or spending adjustments and judge how they will impact the economy. Below is an explanation of what the budget could have in store and how it will impact different parts of the UK market.

You can also look back at what the Conservatives promised in their manifesto during the election here.

How will the pound react to the Budget?

The budget will undoubtedly be a driver for sterling. The pound found support against the dollar and the euro when it was announced that Sunak would be taking over as chancellor. Tighter relations between the prime minister’s office and the Treasury would allow the government to deliver a more aggressive budget to stimulate the economy. His appointment increased confidence that austerity is indeed over, that the spending taps will be opened, and that investment will see a significant step-up from current levels.

If this is the case as many expect, then this could be beneficial for sterling as it would be seen as a way of invigorating growth, and therefore a rate cut by the Bank of England (BoE) is more likely. However, increased spending and investment could also signal a move away from keeping the budget balanced in terms of day-to-day spending that was favoured by Javid, causing a larger deficit, which could have the opposite effect on the pound. It seems the chancellor’s job will be finding a balance between the two if he wants sterling to strengthen after the budget.

Current expectations seem to favour potential upside for the pound on budget day, but this is far from guaranteed. What we do know is that it will be a volatile day for sterling.

Read more about how to trade the pound and forex

Taxes, pensions and national insurance

  • National insurance: It is highly likely that the government will look to raise the threshold for paying national insurance from the current rate of around £8632 to around £9500, as part of a longer-term goal to push that up to £12,500.
  • Pension tax: There have been reports that the government is considering cutting the rate of pension relief tax for higher earners. Currently, pension relief tax is aligned with the income tax that is paid, so a basic rate of 20% and a higher rate of 40%. It is possible the higher rate of 40% could be cut to 20%.
  • Mansion tax: A tax on owners of larger properties now looks off the table after several Conservative MPs voiced concerns about the proposal, which would target a very small handful of wealthy individuals.
  • Inheritance tax: There have been discussions in the Conservative party about cutting the rate of inheritance tax from the current rate of 40%, with some calling for it to be slashed to 10%. However, this again targets only a small group of wealthy individuals so it is unclear how big a priority this will be in the budget.
  • Council tax: Local councils have been gradually given more control over their own council tax rates and have been allowed to raise them, mostly to fund any gaps in funding for social care. Many councils have already raised rates by as much as they have been allowed, although many still face a shortfall in funding, so there is a chance they will be given more wiggle room in the budget.
  • Corporation tax: This is expected to remain at the current rate of 19% to help fund the government’s spending plans.
  • Capital gains tax: ‘Entrepreneur’s Relief’, which lowers the rate of capital gains tax paid on disposing of certain assets, is likely to be reformed or even potentially abolished.
  • National Living Wage: The government has promised to raise the National Living Wage to £10.50 by 2024 and the first step toward that could be unveiled on budget day.


The Conservatives have said they are aiming to be building 300,000 homes per year by ‘the mid-2020s’, up from around 150,000 to 185,000 being built annually at present. The environment is expected to remain favourable for housebuilders considering the Help to Buy scheme, which has been hugely profitable for the sector, has already been extended. There could be movement on stamp duty on second homes to encourage more landlords to enter the market and help contribute to the supply of new rented accommodation. There will also be more news on the ‘First Home Scheme’ that is aimed at providing housing to certain people, like nurses and veterans, at up to 30% below market value. Long-fixed term mortgages could also be announced for first-time buyers. There could also be a shake-up of the rented sector.

Stocks to watch: It could be a volatile day for housebuilders like Barratt Developments, Persimmon, Berkeley Group, Taylor Wimpey, Redrow and Bovis Homes. Same goes for estate agents like Countrywide, Purplebricks and Foxtons.


Public transport should be prominent in the Budget. The government has already said it intends to spend £5 billion over the next five years on bus services and cycling routes in England, including buying 4000 carbon-free buses. The Conservatives also vowed to invest more in rail infrastructure up North as part of its ‘levelling up’ programme, including metro or light rails in Yorkshire and Manchester. We could also hear an update on the government’s approach to how rail franchising currently works, although a proper update isn’t expected until a review is released later this year.

Stocks to watch: Companies that run rail and bus networks will undoubtedly benefit from new lines being introduced and the extra investment being ploughed into public transport. Yet they are also coming under pressure to provide better, more reliable services and could see any developments harm their profitability. Watch stocks like Go-Ahead Group, Stagecoach Group, National Express and FirstGroup.

HS2 and major infrastructure

The government wants to significantly step up investment in major infrastructure projects and said during the election that it would invest £100 billion in building new infrastructure, including almost £29 billion on roads and £4 billion on flood defences. It seems keen to borrow to invest while interest rates are low. It also promised to create 10 new ‘free ports’ to help manufacturers and exporters.

High-Speed 2, or HS2, is the project in the spotlight in the moment after the government said it would go ahead with it even though it is running behind schedule and is over budget. Spending on rail networks up north is also likely to increase. You can read more on HS2 and what stocks are involved in this mega-project here.

A national infrastructure bank could be unveiled considering the government wants to make a strong statement that the UK is open for investment and able to provide efficient debt for infrastructure, especially now that it can no longer tap into the European Investment Bank post-Brexit.

Stocks to watch: Infrastructure spending will undoubtedly rise in this budget, which should translate to more work for construction stocks like Balfour Beatty, Morgan Sindall, Kier Group, Skanska and Vinci.


The prime minister has made the rollout of faster full-fibre broadband a personal priority. Around 90% of the country still needs to be covered and there are huge questions over where the funding will come from for such a big infrastructure project – BT Group estimates it could be around £30 billion.

Stocks to watch: BT Group is the key stock to watch as it runs Openreach, the national broadband network that is used by other operators. The main question is how much of the funding gap will be filled by the public purse and how much will be funded privately. News on this front will also impact other UK broadband providers like Vodafone and TalkTalk.

Business rates

The high street continues to struggle, and the government has promised to help support retailers that are suffering lower footfall and tough competition from online competition. The number one burden is business rates, which the government intends to review. Currently, business rates are due to rise 1.7% from the start of April, which according to Deloitte would push up the national cost by £425 million per year.

It is unlikely they will be scrapped altogether, but the government could lessen the cost for businesses by evaluating how they are calculated, or shifting to a more phased approach when increases or decreases are introduced following a revaluation of the property’s value.

Stocks to watch: Bricks-and-mortar retailers will be expecting to hear good news at the budget, so the question is whether they will be impressed by the government’s plan or left underwhelmed and disappointed. Pubs and cinemas were also promised relief during the election.

Digital services tax

The UK has also pledged to go ahead with a digital services tax on tech giants that make money off UK consumers but are perceived to pay too little in tax. This is seen as a way of addressing the imbalance in costs paid by bricks-and-mortar retailers and online ones.

The issue is sensitive considering most of the big names in the crosshairs – like Facebook and Alphabet – are US companies. The UK is meant to be starting trade talks with the US in a matter of weeks, and the US has warned it will retaliate if the tax is introduced, possibly targeting British cars. This means trade talks could quickly turn to a trade war.

Everything you need to know about the UK-US trade deal

Stocks to watch: The tax is expected to be introduced despite warnings from the US government. If implemented, then it could encourage more countries to follow and put pressure on the share prices of big tech companies. This would also prompt fears of tariffs on UK cars shipped to the US, so watch UK automotive stocks too.

Energy and the environment

The Conservatives pledged to ‘prioritise the environment in the next budget’, although it is unclear how far the government will go. A rise in fuel duty could be on the cards and there could be considerable sums dedicated to improving the energy efficiency of homes and businesses. In terms of renewable energy, any news is likely to focus on offshore wind farms. Although the government is working toward making the UK carbon-neutral by 2050, it also promised a ‘new transformational sector deal’ for the UK North Sea oil industry. The government’s Environment Bill 2020 also features waste and recycling as a priority.

Read more about the war on plastic: who will be the winners and losers?

Stocks to watch: The energy and environmental issues of the budget could impact a wide array of stocks, including oil and gas companies like BP, Shell and EnQuest, firms that manufacture wind turbine components such as Vestas and Siemens Gamesa, and firms involved in waste management and recycling such as Pennon Group and Biffa. Those that help improve the energy efficiency of homes and businesses could be impacted, like insulation stocks such as Autins Group and Kingspan Group. Packaging firms like DS Smith and Mondi should also be on the radar.

Health and social care

The government has promised to invest tens of billions of pounds into health and social care, including building new hospitals and hiring tens of thousands of extra nurses. The extra investment into social care is likely to be funded by increases in council tax, which is being decided at a local rather than national level. It is the one major policy area that the Conservatives have been willing to follow a ‘cross-party consensus’ built on a platform that no one should have to sell their home to fund their care in later life.

Stocks to watch: Investments in new hospitals and health infrastructure would be good news for construction stocks and companies that provide services to the National Health Service (NHS) such as Capita, Serco, Spire Healthcare and Totally. It is also worth monitoring firms that let out properties to NHS organisations, such as Primary Health Properties and Assura. There is little doubt that those providing social care services will have more work in the years to come, but there are still questions over how profitable it will be, so watch firms like Caretech Holdings.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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