Drugs groups on a high

IF THE City was looking for the Chancellor to kick-start the sluggish stock market, it was left disappointed - and uneasy about the longer term. Strategists say there was little to ignite a share buying spree. Even faint hopes of a cut or abolition in stamp duty on share deals were dashed.

One economist said: 'Greenspan and Brown were a damp squib for markets on both sides of the Atlantic.'

The big worry for the City is that higher National Insurance contributions will hit company earnings and take cash out of the consumer's pocket. Though the increase in NI contributions does not come in until next year, some City pundits believe it as aimed at helping to slow down the economy.

Mark Miller, at Morgan Stanley, said: 'My first assessment would suggest that the first interest rate hike from the Bank of England would tend to come later in the year rather than sooner.'

Ian Stewart, at Merrill Lynch, thought the measures would have little impact on the stock market. George Buckley, at Deutsche Bank, considered the increase in NI as a 'bad move' for companies. Few believe it will have a material impact on profits, although it is likely to force firms to review overheads. That could lead to a round of job cuts.

Some sectors benefited from the Chancellor's largesse. The drug giants GlaxoSmith-Kline and AstraZeneca - who spend millions researching new drugs - will gain from tax incentives worth around £400m a year. Firms researching vaccines for HIV, for example, can write off an extra 50% of the cost against their tax bills. One estimate is that GSK could gain £50m overall.