Shares in BT Group PLC (LON:BT.A) jumped after the Budget announcement from chancellor Rishi Sunak including a surprise policy that will allow companies to cut their tax bill if they increase investment.
Under the two-year investment “super deduction” policy, businesses investing in new plant and machinery assets will be able to reduce their tax bill by 130% of the cost of investment.
In other words, the super deduction will allow companies to cut their tax bill by 25p for every £1 they invest.
BT is expected to be a big beneficiary as its Openreach arm is investing millions to upgrade its UK broadband network to full fibre optic cable run right up to the door, known as FTTP.
Neil Wilson, chief market analyst at Markets.com, said: “BT has emerged as one of the big winners from the budget as the super deduction tax relief will allow it to offset its fibre infrastructure spending.”
He added: “Any capital intensive projects should be winners.”
BT shares rose 7% to 134.48p in afternoon trading.
Oil companies should also benefit from the investment-based tax break, said Derek Leith, EY’s global oil and gas tax leader.
“It would be an unusual Budget if the Chancellor didn’t find some space for an oil and gas measure: oil and gas has only been absent from a UK Budget on two occasions in the past 25 years. Budget 2021 didn’t disappoint with a specific clarification on the detailed rules for oil and gas decommissioning relief. There are also some knock-on effects of the Chancellor’s announcements on the corporation tax rate, the super deduction for investment, and the extended loss carry-back.”
Other winners from the Budget include banking stocks, which all reacted positively, with Barclays (LON:BARC) rising almost 4%, Lloyds (LON:LLOY) and NatWest (LON:NWG) up 2%, and HSBC (LON:HSBA) increasing 1.6% to 430p.
“A stronger near-term economic outlook than previously expected bodes well for the sector,” said AJ Bell.
An announcement of the first ever UK Infrastructure Bank to drive a ‘Green Industrial Revolution’ and support public and private projects, with an initial £12bn capitalisation and expected to support £40bn of projects, saw only a muted reaction from renewable infrastructure funds, with John Laing Environmental Assets edging just 0.6% higher to 114.7p, Greencoat UK Wind up 1.2% to 130.1p and The Renewables Infrastructure Group just 0.3% higher to 130.2p.”