Investment Opportunities Arise with £4TRILLION Spending: A Guide to Maximizing Your Investments by Incorporating Profitable Enterprises: Here's the list of companies set to reap significant benefits and strategies for investing in them.
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After the blowout comes the hangover – the economic debt we all must face post-Rachel Reeves' Spending Review last week. While we eagerly await to see which taxes she'll hike in the autumn Budget to cover it, we can help ourselves by investing in some of the companies that will reap the benefits from her spending spree.
The Chancellor has announced billions for affordable housing, defense, healthcare, nuclear power, and transport. These funds will eventually end up in the pockets of companies that build, maintain and provide the services paid for. In total, she plans to 'invest' £4 trillion to refresh Britain.
Here are some of the top winners and how you can capitalize on the cash headed their way:
DEFENSE
With global chaos continuing, the defense sector gets a substantial boost of £14 billion in the Spending Review. By 2027, 2.5% of our national income will be spent on defense technology, weaponry, and personnel to keep our shores safe. The Government has also pledged to bump defense spending to 3% of GDP at some point during the next parliament.
Who benefits? £4.5 billion of munitions will be manufactured in British factories, boosting companies that produce them. The Defence Estate Optimization program, a massive ongoing program to upgrade UK defense infrastructure, receives a boost from the 7.3% rise in the capital budget. This benefits current contract handlers and those waiting for contracts from the program.
How can I get exposure? If you want to own defense stocks directly, a significant chunk of the munitions largesse is staying close to home. Listed aerospace company BAE Systems owns the weapons factories that will ramp up production to meet new targets. BAE, along with Rolls-Royce, will also be involved in the delivery of new submarines. Babcock, which services and maintains the submarine fleet, will also see a boost.
However, defense companies are already soaring high. Babcock shares are up 108% this year, and BAE's up 68%. Another option is to buy into listed companies Kier, Galliford Try, and Morgan Sindall – infrastructure names that are all involved in delivering the Defence Estate Optimization program. Analyst Joe Brent, at Panmure Liberum, claims Kier is a winner from the defense spending as well as the Chancellor's healthcare boost. The shares are up 19.4% this year, but not as high as BAE.
If you'd rather invest via a fund to diversify your defense exposure, there's now a popular defense exchange-traded fund called WisdomTree that tracks the performance of a basket of defense stocks. It's been around since March and is already up 18%. For something more diversified, James Carthew, co-founder of QuotedData, suggests Global Opportunities Trust. He states, "The trust has long had a much larger exposure to the defense sector than its peers."
HEALTHCARE
Approximately 90% of the real day-to-day increase in public spending will be allocated to the healthcare sector, according to Paul Johnson at the Institute for Fiscal Studies. This means that from 2000 to 2028, healthcare spending will have moved from a quarter to 40% of the total.
Who benefits? Besides daily healthcare funding for the NHS itself, there's also money for capital spending. The Government is dedicated to constructing 25 new hospitals and spending £30 billion on NHS estate maintenance, with more than £5 billion allocated for addressing critical repair needs. Companies building hospitals and other healthcare infrastructure will benefit.
With the Government trying to reduce waiting lists, scope exists for increased collaboration with private healthcare sectors.
How can I get exposure? Private healthcare in the UK is already booming, with figures from the Private Healthcare Information Network revealing that there were more private hospital admissions in the UK in 2024 than in any year on record. New NHS funding won't reduce that figure, and private healthcare is predicted to continue seeing patient numbers rise.
Spire Healthcare, the UK's largest private healthcare provider, has been hit with a profit warning over costs. Despite this, analyst Sebastian Jantet from Panmure Liberum believes it is undervalued.
For a fund option, consider Real Estate Investment Trusts with a healthcare slant, such as INPP and HICL, which invest in building clinics and hospitals. Joe Holland, Investment Manager at Tyndall Private Clients, notes that these trusts trade at significant discounts, with hopes that additional spending will reignite investor interest.
HOUSEBUILDING
Funding for affordable homes, which was confirmed at £39 billion over ten years, nearly doubles annual funding.
Who benefits? Darius McDermott, from FundCalibre, indicates that the plan benefits housebuilders, modular construction firms, and property services companies aligned with affordable housing.
How can I get exposure? Investing in housebuilders directly is the simplest means to gain exposure, but it can be risky to put all your eggs in one basket. Analyst Ozge Brinkworth, from Rathbones, suggests Vistry, citing its significant exposure to affordable housing. Despite profit warnings and share drops, Vistry has seen a rise of 18% in the year to date.
Another possibility is Eneraqua, a company that helps individuals and companies decarbonize their properties and save water. Their clients include numerous local councils and hospital trusts, as well as school builders.
Fund fans could consider Aurora UK Alpha, an investment trust with a substantial number of housebuilders for those who prefer a spread. Just remember, this fund is tightly concentrated, making it a riskier option compared to funds with a larger spread.
Property taxes could potentially increase to cover the costs of the £4 trillion investment announced by the Chancellor, affecting individuals and investors alike. In the sports industry, private healthcare providers, such as Spire Healthcare, may see increased profits due to the government's commitment to reducing waiting lists and constructing new hospitals.
