UK housebuilding shares drop on warning of ‘painful budget’
Kitchen suppliers among fallers as Starmer’s speech spooks markets
UK housebuilder shares sank yesterday amid a slight nudge up for the wider FTSE 100, after British prime minister Keir Starmer’s warning that the government’s forthcoming budget will be “painful”.
In a speech in the Downing Street rose garden, Mr Starmer said his government has done more in seven weeks than the Conservative government did in seven years.
But he warned “things are worse than we ever imagined” because of a £22bn (€26bn) “black hole” in the public finances, claiming to have found out last week that the Tories had borrowed almost £5bn more than the Office for Budget Responsibility expected.
Shares in UK housebuilders had been among the biggest gainers when the Labour government swept to power this summer on a promise to ramp up construction.
Housebuilder Barratt fell 6.56pc yesterday, closely followed by Berkeley Group and Persimmon.
The FTSE 100 rose 17.68 points, or 0.21pc, to end the day at 8345.46.
Dan Coatsworth, investment analyst at AJ Bell, said that while Labour has pro-housebuilding policies, investors “didn’t like the tone” of the speech.
“The prime minister’s tough talk on things getting worse before they get better might give some households the jitters and make them not want to get into more debt, such as taking on an expensive mortgage.
“That could have a negative impact on property market activity, hence why shares in housebuilders, property portals and kitchen companies were among the biggest fallers on the FTSE 100.”
In Europe, Frankfurt’s Dax index rose 0.44pc while the Cac 40 in Paris closed down 0.32pc.
In New York, a little while after markets had closed in Europe, the S&P 500 was trading down 0.03pc while the Dow Jones was 0.23pc lower.
On currency markets, the pound had gained 0.34pc against the dollar at 1.3232 and had risen 0.33pc against the euro at 1.1854.
In company news, distribution and outsourcing firm Bunzl increased its profit guidance for the year.
The FTSE 100 business told shareholders it now expects adjusted operating profits for 2024 to “show a strong increase in comparison with 2023”.
It came as Bunzl reported that adjusted operating profit grew by 3.9pc to £455.5m over the first half of this year. Bunzl shares rose 7.97 yesterday. Brent crude oil futures were down 1.98pc to 79.81 US dollars as markets were closing in London.
The biggest risers on the FTSE 100 were Bunzl, up 256p to 3470p, easyJet, up 30.9p to 478.8p, IAG, up 3.55p to 183.25p, Whitbread, up 50p to 2898p, and Antofagasta, up 32.5p to 1910.5p.
The biggest fallers on the FTSE 100 were Barratt Developments, down 36.2p to 515.6p, Berkeley Group, down 225p to 4980p, Persimmon, down 73.5p to 1632p, Scottish Mortgage Investment Trust, down 37p to 826.2p, and JD Sports, down 6.15p to 143.1p.
‘The Tories had borrowed almost £5bn more than expected’