There is much speculation as to what will be in the upcoming autumn budget, and nervousness around what that could mean for the wider economy, but there are a variety of sectors and stocks that could benefit from policy changes.
Concerns have been growing around the potential impact of what is rumoured will be announced in chancellor Rachel Reeves' first budget on 30 October.
Prime minister Keir Starmer has already warned that the budget is "going to be painful", as the Labour government seeks to plug a £22bn "black hole" in public finances.
Tweaks to capital gains tax (CGT) and inheritance tax (IHT) are among the changes that it are speculated to be announced.
However, Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "The upcoming budget and its potential repercussions, can’t be viewed in isolation.
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"The economy is also likely to feel the continuing benefits as interest rates head lower."
Bank of England governor Andrew Bailey said in an interview with the Guardian last week that the central bank could become "more aggressive" in its approach to lowering interest rates if inflations continues to cool. However, BoE chief economist Huw Pill appeared to contradict this view when speaking at a conference on Friday, urging caution over future rate cuts.
The Bank of England cut interest rates for the first time in more than four years in August, lowering the base rate to 5%. Rates were held in September, with markets betting on the next cut to come in November.
Streeter said: "While the budget may be a significant pound pincher for some wealthier individuals, the pledge not to increase taxes on working people while increasing spending on health, housing, and infrastructure development, is likely to create more optimism for other sectors".
Here are some of the sectors and stocks that could be set to benefit from what is anticipated to be included in the budget, according to the experts.
Infrastructure-focused stocks
Reeves has signalled that the government plans to increase investment in major projects in the upcoming budget.
In addition, it is also expected that the chancellor will also share changes to self-imposed borrowing rules to help fund extra investment.
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Streeter said such a move could give "extra wind in the sails of major civil engineering companies which have already benefited from government contracts".
Balfour Beatty (BBY.L)
Given that the public sector makes up over 95% of future orders in its UK business, this infrastructure firm is one to watch.
Streeter also highlighted that "spending on improving public services one be one of the top priorities of the Labour administration".
Shares in Balfour Beatty have climbed nearly 30% year-to-date.
Kier Group (KIE.L)
Streeter said the company has seen its "order book significantly strengthened to reach nearly £11bn ($14.4bn) after a string of contract wins over the last 12 months".
"It has showed strength in dealing with supply chain challenges and inflationary costs," she added. "It’s staging a turnaround, and now appears back on track after a highly difficult period when it appeared to be on the brink of bankruptcy and was hit hard by the pandemic."
Kier Group shares are up nearly 30% year-to-date.
National Grid (NG.L)
Streeter said that investment in energy infrastructure would benefit National Grid, as the operator has been "attempting to plant itself at the centre of the electric revolution".
"It’s announced a huge investment plan to underpin this strategy and has been selling of unaligned assets to free up extra cash to plough back into other areas of the business," she added.
Shares have been under pressure this year, down 6% year-to-date. The stock slid following the release of its full-year results in May, when it announced an 8% fall in operating profits to £4.48bn, down from £4.88 in 2023.
However, National Grid also announced a plan to invest £60bn over the next five years, nearly double the amount it had invested over the previous half a decade.
Housebuilders
"As expected, housebuilders have already been among the beneficiaries with Reeves emphasising her commitment to reducing planning red tape and speeding up homebuilding programmes," said Streeter.
Housebuilding stocks were buoyed by the Labour party's landslide victory in the July general election. This also helped drive investor optimism in the UK market more broadly, with the FTSE 100 (^FTSE) index up 7.6% year-to-date.
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This came after a tough period for the sector, with pressure from higher interest rates, but with more cuts on the horizon, Streeter said that this is easing headwinds for these companies.
"The promise to extend the mortgage guarantee scheme should also help with demand," she said.
Vistry (VTY.L)
Vistry, which is focused on providing affordable housing, is set to continue to be a strong position thanks to its pivot to a partnership model, she said.
"This means it works with developers to build homes often in the public sector for long-term investors," she explained.
Shares have seen strong gains year-to-date, up close to 42%.
Bellway (BWY.L)
Streeter said the housebuilder should benefit from the government's plans to "kickstart the building of 1.5 million new homes by shaking up the planning system and fast-tracking urban brownfield sites for development", given its focus on constructing family homes.
"It’s kept its guidance for housing completions unchanged for the year but has lifted its pricing forecasts, and already there has been stronger trading through the key spring season," she said.
Shares in the FTSE 250 (^FTMC) firm are up 22% year-to-date.
Consumer discretionary stocks
Reeves has ruled out raising income tax, VAT and national insurance in the budget, effectively ring-fencing working people from tax rises.
Streeter said that this pledge, in addition to the fact that borrowing costs are set to fall with further rate cuts, could benefit consumer stalwarts in the months ahead.
Greggs (GRG.L)
The bakery chain, which is up 11% year-to-date, is now a "real staple in town centres and retail parks across the country, with an improved reputation to boot and little hint of flaky sales in sight", according to Streeter.
"The prospect of more money in the pockets of consumers, as borrowing costs come down could help boost sales further," she said.
Marks & Spencer (MKS.L)
At the more premium end of consumer spending, Streeter said that Marks & Spencer continued to make remarkable progress with its ranges which have tickled the fancy of shoppers, leading to some "impressive revenue growth".
"Its core customers have been more insulated from cost of living headwinds, but they’ll still have an eye on trimming costs," she added.
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Streeter said that the retailer, which has advanced 36% year-to-date, had "given shareholders plenty to be happy about this year, growing market share and margins while implementing a significant cost-cutting programme".
Tesco (TSCO.L)
The UK's biggest supermarket has seen some investor optimism recently, with shares up 24% year-to-date.
The retailer raised its guidance on adjusted operating profits for the year to around £2.9bn, up from "at least £2.8bn", on the back of strong first-half results released last week.
Streeter said: "Tesco has shown once again that it deserves to wear its grocery crown.
"Volumes have picked up for both essentials and more premium ranges, which is its testament to the groups’ ongoing efforts to beat rivals on price and its deep rooted relationships with suppliers."
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