Investors are warning of a “potential repeat of the infamous 2022 mini-budget” which toppled former Prime Minister Liz Truss’ premiership unless Chancellor Rachel Reeves U-turns on her plans for the economy.
Analysts are sounding the alarm that the FTSE 100 could be hit as the new Labour Government attempts to fill the £22billion “black hole” in the public finances with oil and gas companies being in the firing line
Analysts are cautioning Reeves over introducing a possible windfall tax on these corporations due to the potential consequences it would have.
During the General Election campaign, the then-Shadow Chancellor said she had no plans of doing so if voted into office.
If implemented, a windfall tax on major firms in the gas and oil sector is likely to hurt Britain’s premier index.
As it stands, companies such as Shell, BP, and HSBC make up the top five constituents of the FTSE 100.
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Experts are warning the UK economy could take a hit
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Combined, the three firms make up nearly a fifth of the FTSE 100’s weighting.
Consequently, any significant movement in Shell, BT or HSBC’s share prices could cause the benchmark to fluctuate greatly.
The country is anxiously waiting to see what will be included in Reeves’ Autumn Budget on October 30.
Previously, she has warned that “difficult decisions” are being made as Labour attempts to balance the books.
Outside a rumoured tax raid on corporations, reports suggest capital gains tax (CGT) and inheritance (IHT) are also being considered for reform.
John Choong, the head of Equities and Markets at Investors Edge, broke down what a windfall tax would likely do to the FTSE 100.
He explained: “Reeves’ tax raid risks clamping down on economic growth which could potentially decrease the perceived equity risk premium and trigger further UK equity outflows.
“Thus, in this high-stakes game of economic Jenga, Reeves must tread carefully.
The FTSE 100 is in jeapordy, according to investors
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“One wrong move could send the whole tower tumbling, with a potential repeat of the infamous 2022 mini-budget.”
Daniel Hobbs, the managing director at New Leaf Distribution, added: “A potential windfall tax could have significant implications for the UK stock market.
“While the exact impact would depend on the specifics of the legislation, potential consequences include reduced profitability for targeted companies, negative investor sentiment, sector rotation, and economic uncertainty.
“It’s important to carefully consider the potential consequences of such a policy change.”
