FTSE in-depth: Osborne stamps on Square Mile
If George Osborne really cared about the City, surely he would have abolished stamp duty on share deals in his second Budget.
Foster: Stamp duty abolition would give UK shares a huge lift
Unfortunately, the Chancellor didn't. So why not?
Dealers agree that the long-awaited move would prove to be revenue neutral and beneficial for the economy as it would bring other tax gains to the Exchequer.
The 0.5% rate at which stamp duty is paid in the UK is far higher than levies in Germany and the US.
France has a rate of 0.13% and effectively exempts transactions under £5,000.
The penal rate continues to threaten the London Stock Exchange's position as one of the world's top three stock exchanges and Osborne & co should do something about it.
The knock-on effects of stamp duty abolition would give UK share prices and turnover a huge lift.
Enhanced share values for a start would provide an initial increase in Capital Gains Tax revenues of about £6bn, while the volume of shares traded on the London Stock Exchange would probably surge by 40%.
There would be overall efficiency gains to the economy of around £3bn, which compares with the £2.5bn raised per year by the government from stamp duty on dealings.
Even more important is the fact that it would help secure the future of stockbroking firms. Many investors would return to share dealing in the ordinary way instead of using controversial derivatives known as contracts for difference (CFDs) which do not attract tax.
So what did the City get instead from Osborne's hour long rant? To coin a phrase from magician Paul Daniels: 'Not a lot.'
Dealers gave the thumbs up to the 2% reduction in Corporation Tax to 26% with the promise of a further 1% annual cut for the next three years, a fuel duty cut of 1p per litre and help for first-time buyers of newly built homes, but were generally underwhelmed by the whole fiscal package.
The Footsie was 3.7 points up at 12.30pm when Osborne stood up and was 1.14 better when he sat down. Thereafter, it made modest progress to close 33.17 points better at 5,795.88.
Buyers shrugged aside ongoing concern about Libya and Japan's nuclear crisis, while Wall Street retrieved a 21 point deficit to trade that much higher despite a 16.9% fall in new US home sales in February.
Our weekly newsletter on Thursday will reveal how the Budget affects you:
Miners featured good gains as metal prices improved. Kazakhmys rose 61p to 1430.5p, Xstrata 48p to 1422p, and Rio Tinto 114.5p to 4128.5p.
Disappointing fourth-quarter sales figures dragged supermarket group J Sainsbury 19p lower to 335.2p. Continuing its fall since reentering the Footsie on Monday, broadcaster ITV lost 4.35p more to 80.425p.
Broker Jefferies downgraded to underperform, suggesting the advertising growth outlook looks unpromising. Others say the fall from the mid-nineties has been overdone.
The oil sector was the biggest Budget casualty after the Chancellor raised the supplementary charge levied on oil and gas production to 32% from 20pc. BG Group fell 30.5p to 1474.75p, Enquest 19.7p to 137.15p and Premier Oil 79p to 1910.5p.
Among secondary issues, Nautical Petroleum shed 44.5p to 399.375p and Valiant Petroleum 48p to 557p.
Buyers climbed aboard transmission systems group Torotrak, 10.5p better at 49.25p. Tipped at 20p by Charles Stanley in late November, the shares were in big demand on expectations of imminent licence payments of at least £6.75m from 9pc shareholder Allison, the US engineer, to preserve exclusivity rights.
Skyepharma, the speciality drug delivery company, rose 6.63p to 44.5p after returning to profitability last year. Management expect approval and the launch of asthma treatment Flutiform in Europe in the second-half of the current year by partner MundiPharma.
Pan African Resources edged up 0.5p to 10.5p on hearing that work is on schedule at its Phoenix Platinum Project in the North West Province of South Africa.
Patagonia Gold added 2p at 49p after eliminating the 70pc back-in right agreement with Barrick Gold which was put in place in 2007 when Patagonia bought the exploration portfolio in the Santa Cruz province in Argentina from Barrick. With the resource constraint now lifted, management is well-positioned to fast-track exploration and resource development.
Advertising and marketing services group Adventis, in which Savills owns 30.5%, slumped 0.88p to a 52 week low of 2.5p. Investors ran for the exit after the Newspaper Publishers Association terminated recognition of the group's media companies, due to concern about the financial performance. The board immediately said it was now considering a possible sale of its media units.
One analyst said: 'Chief executive Charles Phillpot's days are numbered. He should have fallen on his sword months ago.'
Strong full-year results featuring a return to profitability and to the dividend list (2p) helped Lupus Capital, in which Greg Hutchings holds 10.4%, jump 14p to 140p.
The company which supplies building products to the housing/commercial property sectors in Europe saw earnings per share soar 39% to 13.1p driven by market share gains and margin increases. Liberum Capital says buy.
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