Wednesday, 21 March 2012

Specific measures

There was no minimum price for alcohol that many had believed may occur but the Government will set out a package of policies to address the harms of abuse in a forthcoming ‘Alcohol Strategy’. We expect that if it were to announce a minimum price, it would undermine deep discount supermarket deals and could be modestly positive for drinks-led pubs companies.

Tobacco products duty rates will increase by 5% above RPI which will be implemented from 6pm today. This increase equates to a 37p increase on a standard pack of cigarettes. The UK makes up 17% of Imperial Tobacco’s revenue and we would expect it to increase its prices above the stated amount which will drive higher operating profit margins within the company.

The Government will support Network Rail to invest £130 million, in the Northern hub subject to value for money, to improve the transport links between Manchester and Sheffield, Rochdale, Halifax, Bradford, Bolton, Preston and Blackpool. Capacity will increase on the Hope Valley line between Manchester and Sheffield, which will enable the number of fast trains running on the route to double.

This is very much in line with expectations; the recent Government White Paper on rail hinted of new investment for Network Rail. This does not significantly impact the Train Operating Companies.

The Government announced that airport capacity will be addressed later this Summer by Justine Greening, the Transport Secretary. Air Passenger Duty (APD) rates will rise from April 2012, as set out at Autumn Statement 2011. APD rates for 2013-14 will rise by the RPI from 1 April 2013, as set out in Overview of tax legislation and rates. Following strong lobbying from the airlines, the World Travel & Tourism Council, the Civil Aviation Authority and the Airport Operators’ Association to drop this tax, the decision to continue could be seen as a negative.

EDMUND SALVESEN - DIRECTOR OF EQUITY RESEACH

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