The Share Centre - How cuts will affect the market

Nick Raynor, investment advisor at The Share Centre explains how the recent budget cuts will affect companies on the Stock market and who may benefit:

£30bn will be spent on transportation and the improvement of roads, rails and other infrastructure. The companies that will largely benefit are those who already have contracts in these areas, and good relationships with the Government.

Who may benefit: Balfour Beatty, Serco, Amec, Carillion and Hill & Smith

The education budget has not been harmed as savings were made from a 1% fall in administrative costs and the abolishment of five Quangos. Schools in England will get a real-terms increase in funding. The budget will increase from £35bn to £39bn.

Who may benefit: Pearson, RM Group, Compass Group

£200m will go towards offshore wind and manufacturing at port sites. Incentives for families to reduce bills; green deal for home efficiency.

Who may benefit: Forth Ports, Renesola Ltd, Pure Wafer.

Raynor gives an overview of the market in relation to Government cuts and the VAT increase: "The stock market has produced a muted reaction to the cuts so far and we actually saw more movement yesterday after the defence cuts were announced. Support service company Babcock International works extensively with the UK armed forces and yesterday saw its share price fell over 10% during the day. Also, BAE Systems was under focus from the markets, however as the cuts mainly affected the Air Force and Navy, BAE share price did not react as badly as it could have.

"Also, an important factor to take into consideration is the increase in VAT that is due to be implemented at the beginning of 2011. The 20% increase will affect retailers across the board and ultimately our pockets. Lower spending equals lower revenues and lower profits, retailers in general have been warning over future earnings and are cautious looking ahead."