London open: Stocks nudge down as business confidence falls to two-year low

(Sharecast News) - London stocks nudged lower in early trade on Monday following a downbeat session in Asia and as investors mulled a drop in UK business confidence. At 0825 GMT, the FTSE 100 was down 0.1% at 8,212.25.

The fourth-quarter survey from the British Chambers of Commerce showed that proposed tax changes in the Autumn Budget pushed business confidence to its lowest level in more than two years, with more than half of firms expecting prices to rise in the first quarter of 2025.

According to the survey, 63% of UK businesses say taxation is now a concern following the changes, up from 48% in the third quarter and the highest level since 2017.

In October, the chancellor announced that, from April 2025, the earnings threshold at which employers start paying national insurance contributions will fall from £9,100 to £5,000, while the rate being paid will rise from 13.8% to 15.0%.

Some 55% of firms now expect prices to go up over the next three months with labour costs the biggest driver, the BCC said. This compares with just 39% in the third quarter.

The BCC's Quarterly Economic Survey, which includes responses from nearly 5,000 businesses between 11 November and 9 December, showed that just 49% of firms expect their turnover to increase over the next 12 months, down from 56% in the third quarter and the lowest figure since the aftermath of the mini budget in late-2022.

Just two fifths of firms expect their profits to increase over the next year, down from 48% in the third quarter.

"The worrying reverberations of the Budget are clear to see in our survey data. Businesses confidence has slumped in a pressure cooker of rising costs and taxes," said Shevaun Haviland, director general of the BCC.

"Firms of all shapes and sizes are telling us the national insurance hike is particularly damaging. Businesses are already cutting back on investment and say they will have to put up prices in the coming months."

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "The report will be an unwelcome read for the government which has already been hit with disappointing growth figures, which showed a stagnation for the economy in the three months to September, then a contraction in October.

"Nevertheless, the infrastructure investment boost included in the Budget should help provide a tailwind for activity, and the expected reduction in interest rates is likely to offer relief to companies and consumers."

Meanwhile, a survey released in China showed that activity in the services sector grew in December at the fastest rate in seven months amid a jump in domestic demand, although foreign orders fell.

The Caixin/S&P Global services purchasing managers' index ticked up to 52.2 from 51.5 in November. This was above the reading of 51.7 expected by economists and the fastest expansion since May 2024.

A reading above 50 indicates expansion, while a reading below signals contraction.

The new business sub-index printed at 52.7 in December, up from 51.8 in November.

Wang Zhe, senior economist at Caixin Insight Group, said: "Since late September, the synergy of existing policies and additional stimulus measures has continued to act on the market, producing more positive factors."

In equity markets, broker notes were having a big impact amid a dearth of corporate news.

Rolls-Royce was knocked lower by a downgrade to 'neutral' at Citi.

"Following a strong recovery from the depths of Covid, we believe Rolls-Royce shares are now approaching what we consider to be current fair value," the bank said. "We have increased our target price to 641p, leaving some upside, but insufficient to remain buyers."

Unilever also fell after a downgrade to 'underperform' from 'sector perform' at RBC Capital Markets, which slashed the price target to 4,000p from 4,800p.

Barratt Redrow was among the gainers after an upgrade to 'buy' at Redburn, while Flutter and Entain rose as Citi said they were among its top picks in the sector for 2025.

Experian also pushed higher after an upgrade to 'outperform' at RBC Capital Markets.

Elsewhere, UK and US-listed oil group Diversified Energy lost ground as it announced the acquisition of several assets in America's Appalachian Basin, across Virginia, West Virginia and Alabama, which it says will complement existing operations and provide synergies to improve margins.

The company is spending $45m on the assets, which currently produce around 2m barrels of oil equivalents per day.

Market Movers

FTSE 100 (UKX) 8,212.25 -0.14% FTSE 250 (MCX) 20,636.27 0.22% techMARK (TASX) 4,621.42 0.25%

FTSE 100 - Risers

Intermediate Capital Group (ICG) 2,084.00p 1.46% Barratt Redrow (BTRW) 426.30p 1.38% Standard Chartered (STAN) 1,000.50p 1.16% Flutter Entertainment (DI) (FLTR) 20,640.00p 1.13% Experian (EXPN) 3,488.00p 1.10% Pershing Square Holdings Ltd NPV (PSH) 4,078.00p 1.09% Spirax Group (SPX) 6,755.00p 1.05% Schroders (SDR) 324.80p 1.00% NATWEST GROUP (NWG) 406.80p 0.94% Intertek Group (ITRK) 4,676.00p 0.91%

FTSE 100 - Fallers

Rolls-Royce Holdings (RR.) 571.40p -2.32% Unilever (ULVR) 4,479.00p -1.80% WPP (WPP) 803.20p -1.33% Smurfit Westrock (DI) (SWR) 4,261.00p -1.27% Next (NXT) 9,428.00p -0.99% BAE Systems (BA.) 1,142.00p -0.95% Rio Tinto (RIO) 4,659.00p -0.83% Reckitt Benckiser Group (RKT) 4,834.00p -0.72% Diageo (DGE) 2,431.00p -0.71% Marks & Spencer Group (MKS) 387.80p -0.69%

FTSE 250 - Risers

AO World (AO.) 107.40p 4.68% Ninety One (N91) 152.60p 4.38% Spectris (SXS) 2,536.00p 3.34% Ferrexpo (FXPO) 108.40p 3.24% Oxford Nanopore Technologies (ONT) 134.90p 2.98% Aston Martin Lagonda Global Holdings (AML) 108.40p 2.85% Mobico Group (MCG) 82.20p 2.62% Wood Group (John) (WG.) 66.35p 2.55% IP Group (IPO) 55.00p 2.42% Kier Group (KIE) 150.00p 2.32%

FTSE 250 - Fallers

FirstGroup (FGP) 154.40p -4.69% Energean (ENOG) 1,043.00p -3.07% Crest Nicholson Holdings (CRST) 163.60p -2.39% Bakkavor Group (BAKK) 141.00p -2.08% Morgan Sindall Group (MGNS) 3,785.00p -1.94% NCC Group (NCC) 145.80p -1.49% CMC Markets (CMCX) 242.50p -1.42% Cranswick (CWK) 4,805.00p -1.13% SDCL Energy Efficiency Income Trust (SEIT) 55.40p -1.07% Telecom Plus (TEP) 1,720.00p -1.04%