Chancellor Rishi Sunak pledges extra £30bn to save the UK economy

In his mini-Budget, the Chancellor spells out plans to tackle the deepest recession since records began.

A £30 billion ‘plan for jobs’ helped to perk up shares in a number of sectors today as Rishi Sunak delivered on his promise to support companies in hospitality, leisure and housebuilding.

While most of the chancellor's mini-Budget had been trailed in advance, his offer of vouchers giving diners 50% off midweek meals in August came as a surprise to the industry.

His plea for households to “Eat out to help out” was accompanied by a deeper-than-expected temporary cut to VAT on food, accommodation and attractions from 20% to 5%.

Having been as much as 5% lower prior to the Chancellor's announcement, shares in pub companies Marston's (LSE:MARS) and Mitchells & Butlers (LSE:MAB) surged back into positive territory for a brief time. There was a longer lasting impact for struggling Frankie & Benny's owner Restaurant Group (LSE:RTN) which rose 3% to 60p.

In the FTSE 100 index, Whitbread (LSE:WTB) was up 2% at one point on hopes that the voucher scheme and VAT cut will inspire a “staycation” boost for its Premier Inn, Beefeater and Brewers Fayre brands this summer. The shares were later flat at 2,305p.

Richard Hunter, interactive investor's head of markets, said the short-lived spike for most share prices reflected the temporary nature of many of the Chancellor's proposals, which also include a plan to increase the stamp duty threshold from £125,000 to £500,000.

Hunter said: “Both the “Eat out to help out” measures and stamp duty relief will have limited impact on longer-term revenues.

“Even so, the Chancellor has clearly recognised the importance of consumerism and house ownership in the UK, and though these measures will not solve all of the country’s forthcoming economic ills, these are nonetheless small steps in the right direction.”

The VAT cut will cost the taxpayer £4.1 billion, but there's no direct support for retailers fighting for survival after the closure of stores during the lockdown.

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In contrast, Sunak has chosen to prop up 750,000 housebuilding jobs and the many more positions that would be impacted by a collapse in the property market.

The chancellor made it clear in today's Summer Statement the lengths he will go to support the sector:

“Uncertainty abounds in the market, a market we need to be thriving.”

That was positive news for the housebuilding sector, with a strong week for Persimmon (LSE:PSN) shares continuing today when its shares rose by another 3% in the wake of the chancellor's statement. Taylor Wimpey (LSE:TW.), Redrow (LSE:RDW) and Barratt Developments (LSE:BDEV) were also ahead 1%. 

Sunak said nine out of 10 people buying a main home this year would pay no stamp duty after the threshold was raised with immediate effect up until 31 March. There was some relief that the policy is being introduced now rather than with the Autumn Budget, thus avoiding a period of stagnation for the market.

But with most people likely to be more worried about their jobs than moving house, many commentators have questioned whether the industry needs another incentive, particularly one costing the taxpayer £3.8 billion. Interest rates are already at a record low of 0.1%, and the Help to Buy scheme is playing a big role in helping first-time buyers onto the property ladder.

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The biggest element of Sunak's £30 billion plan involves the £1,000 the government will pay companies for every member of staff brought back from the furlough scheme. This job retention initiative will cost the chancellor £9.4 billion, while the Kickstarter Scheme for apprentices aged 16 to 24 will add another £2 billion.

There's also a further £2 billion for a green home grants scheme to encourage energy efficiency in homes. That's already given a lift to PVCu specialist Safestyle UK (LSE:SFE), whose shares have risen 5p this week to 30p.

The big unanswered question is how the estimated £160 billion cost of supporting Britain through the Covid-19 pandemic will be paid for. A Budget and spending review will take place in the autumn, with Sunak insisting today that the public finances must be put back on a sustainable footing. Possible options up for review include changes to the triple lock on pension funding.