Editor’s Note: This article was updated on Sept. 28 to reflect policy changes announced over the weekend.
Oil prices continue to weigh on UK markets as the third quarter comes to a close. Gilt yields rose further, while UK stocks ticked up despite the energy market volatility.
The Morningstar UK Index is on course for a 3% rise this quarter and 7% for the year so far. As we approach the final quarter, stocks will likely have to contend with higher interest rates from November, while a raft of policy announcements at the Oct. 28 Autumn Budget could also shape market sentiment.
In this week’s markets brief:
- The Autumn Budget is set to provide relief for the UK’s beleaguered housebuilding sector with a return of the Help to Buy scheme.
- London’s IPO market has also been boosted by Airtel Money’s decision to list in the UK.
- Chancellor John Healey speaks at the Labour Party Conference following a mixed report card from the OECD on growth and inflation.
New Help to Buy Scheme Lifts Housebuilders
Housing stocks have been hit hard this year by the impact of the Iran war, fears of rising UK inflation and mortgage rates, and lowered affordability and consumer confidence. But the announcement of a successor to the Help to Buy scheme has driven a dramatic shift in sentiment today. Many of the sector’s biggest names have seen double-digit increases, with Persimmon PSN up 15%.
Details of the scheme, to be fully announced at the Autumn Budget on Oct. 28, emerged over the weekend. The “Your First Home” policy will run in England, offering first-time buyers the chance to buy property with a 2.5% deposit.
Jack Fletcher-Price, equity analyst at Morningstar, says the proposal could provide a meaningful lift to sales volumes.
“The UK government’s new equity loan scheme could be the catalyst the UK homebuilding sector has been waiting for. While the finer will matter, anything that lowers the deposit barrier for first-time buyers should translate into stronger demand, higher reservation rates and a healthier market for new-build homes,” he says.
“We expect the biggest impact to be on sales volumes rather than house prices, with Persimmon particularly well placed given its high exposure to first-time buyers, while Barratt Redrow trades at an excessive discount to the peer group and remains our preferred value opportunity in the sector,” he adds.
An RBC Capital Markets analyst note last week foreshadowed the announcement, flagging that the budget could be a potential turning point for the unloved sector.
Help to Buy, which ran from 2011 to 2023, provided first-time buyers with a shared equity loan of up to 20%, or 40% in London, on the value of a new build home. This made it easier for buyers to meet both deposit and mortgage affordability requirements, stimulating demand for new builds.
A government report found the scheme generated “very high value for money,” increasing new housing supply by 15% and generating a £25.1 billion boost to the UK economy. It also suggested common criticisms of the scheme, that it artificially inflated housing prices, were overblown.
“A demand-side stimulus would be the most important upside catalyst for the sector, in our view. A government-led evaluation of Help to Buy has poured cold water on common criticisms that it was expensive and inflationary,” said RBC analysts.
They also suggest it would boost construction stocks such as brick manufacturer Ibstock IBST, another frequently shorted UK stock.
UK IPO Market Receives Boost with Airtel Money Listing
The UK’s IPO pipeline appears to be building once again, after Airtel Money filed for a London listing in what could be the largest new market entrant in years.
Airtel Money, which is 77% owned by FTSE 100 firm Airtel Africa AAF, filed for an IPO last week. The company provides mobile payments technology for its customer base in Africa.
The proposed listing will reportedly value the fintech company at over £6 billion, making it the largest UK market debut since Wise’s WISE £6.6 billion IPO in 2021.
“It’s clearly a big positive for the London market,” says Saxo UK investor strategist Neil Wilson. “Lately it’s been like a car boot sale with just crumbs of secondary placements and small capital raisings.”
The listing comes amid an IPO drought in the UK. There have been just 11 UK IPOs of over £100 million since the start of 2023.
Policymakers have attempted to increase the attraction of a London listing through a raft of measures. These include an exemption on stamp duty new IPOs and lower free-float requirements, allowing company founders to keep more of their shares.
With Revolut reportedly exploring a joint UK and US listing, there could be further major market debuts ahead in London.
However, with FTSE 100 firms Schroders and Beazley both delisting in October following takeovers, AJ Bell head of markets Dan Coatsworth says it provides a “stark reminder” that the UK stock market is slowly shrinking.
“While changes to listing rules have made it easier and more attractive for companies to join the market, we’re still not seeing big enough flows of new listings to offset the ones heading for the door,” he says.
“Airtel Money’s IPO announcement this week is a positive, but the market needs the taps to fully open on new listings, not the odd drip we’ve seen in recent years.”
OECD Warning on Growth and Inflation
Chancellor John Healey will address the Labour Party conference in Liverpool on Monday, adding to the buildup ahead of the Autumn Budget.
His speech will come just days after the Organization for Economic Co-operation and Development gave its view on the UK’s economic situation. It was a mixed bag for the government.
In more positive news for the chancellor, the think tank lowered its expectations for UK inflation for this year, to 3.1% from 3.7%. However, that is higher than every other G7 nation except the US.
The UK’s economic growth rate was also upgraded, up to 1.1% for 2026 from 0.9%. The economic think tank also says the Bank of England does not need to raise interest rates this year, and will lower them in 2027.
But the OECD also expects further challenges to mount next year as the impact of the Iran war filters through.
The OECD now expects the UK economy to grow 1% next year, down from previous forecasts of 1.1%. Inflation expectations for 2027 were also upgraded by 0.2 percentage points to 2.6%.
“While the UK should still see some growth this year, albeit minimal, it will depend heavily on how the conflict in Iran plays out,” says Lindsay James, investment strategist at Quilter.
“It remains the case that the situation could worsen further still, which would have a significant knock-on effect on economies. While it is hoped that a resolution will be achieved sooner rather than later, there’s a risk that the OECD’s outlook becomes a best-case scenario,” James adds.
The Latest Earnings Due This Week
In terms of company earnings, financial firm Close Brothers CBG will announce its full year results on Tuesday. High street baker Greggs GRG will reveal a trading update for their third quarter a day later, before pub chain JD Wetherspoon JDW announces full year earnings on Oct. 2.
