FTSE falls as Johnson unveils £12bn-a-year tax rise

  • Oops!
    Something went wrong.
    Please try again later.
·2-min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
Britain's Prime Minister Boris Johnson looks on during a news conference in response to the ongoing situation with the coronavirus disease (COVID-19) pandemic, inside 10 Downing Street, London, Britain, December 19, 2020. REUTERS/Toby Melville/Pool     TPX IMAGES OF THE DAY
UK prime minister Boris Johnson plans to raise national insurance rates by an expected 1.25 percentage points. Photo: Toby Melville/Pool/Reuters

Markets made moves lower on Tuesday in London as an announcement by prime minister Boris Johnson that the UK will implement a tax rise of more than £12bn a year reverberated.

The tax rise will finance a new tranche of spending on health and social care and has been met with a wave of opposition from Conservative MPs. It is the largest tax increase in 28 years. 

Chancellor Rishi Sunak and the prime minister plan to raise national insurance rates by an expected 1.25 percentage points — for both employees and employers. The move is also an attempt to get a handle on public borrowing, which has ballooned during coronavirus. 

In London, the FTSE 100 (^FTSE) closed 0.5% lower. The DAX (^GDAXI) was trading down 0.6% in Germany and France's CAC (^FCHI) also headed 0.3% lower. 

Read more: Pensions triple lock scrapped for 2022/23 as another Conservative manifesto pledge broken

"Stock market traders should remember that the European Central Bank (ECB) will release its monetary policy statement on Thursday," said Naeem Aslam, chief market analyst at AvaTrade. 

"This is a major event because investors will be looking for clues as to how and when the ECB plans to exit its massive stimulus programme. Government bond prices are indicating that a correction is imminent."

US stocks were lower by the close in London following a day off from trading for Labor Day and a miss in the closely-watched jobs report on Friday. The S&P 500 (^GSPC) was down 0.4%. The Dow (^DJI) fell 0.8%. Meanwhile, the Nasdaq (^IXIC) was almost flat. 

“While the recent rise in infections does appear to be impacting growth, most gauges continue to show the US economy in good health," said Mark Haefele, chief investment officer at UBS Global Wealth Management. 

"This will support stocks, in our view, especially in cyclical industries like energy and financials. We continue to advise investors to position for reopening and recovery.”

Read more: Bitcoin becomes legal tender in El Salvador amid suspicion and protest

Markets in Asia closed higher, with the Hang Seng (^HSI) finishing 0.9% up, the SSE Composite (000001.SS) up 1.6% and Japan's Nikkei (^N225) also up 0.9%. 

Sentiment was stronger after Liu He, China's vice premier, stated that Beijing would continue to support small-scale private businesses despite regulatory crackdowns on education and technology sectors.

Investor sentiment in Japan has also risen in the aftermath of prime minister Yoshihide Suga's unexpected resignation.

Investors believe that the next person in charge will be more focused on reducing coronavirus cases and boosting economic growth.

Watch: What is inflation?

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting