Investors should take global view

BANKING giant HSBC is urging investors to cut their exposure to the UK economy in the wake of the Budget. Companies exposed to the consumer boom will suffer most from higher taxes and interest rates ahead. Large employers will take the biggest hit from higher payroll taxes.

The rise in employers' National Insurance contributions will hit regional brewer Wolverhampton & Dudley hardest among larger companies, wiping 4.3% off this year's pre-tax profits.

Support services groups WS Atkins, Serco and Mitie, along with Arriva, National Express and Marks & Spencer would lose more than 3% each. Manchester United would take a 1.1% profits hit. 'Think of David Beckham's salary,' said HSBC strategist Steve Russell. The extra payroll tax kicks in next year.

Retailers, pub and leisure companies will suffer most from a double whammy on consumers. The Budget will take £3.5bn out of shoppers' pockets next year by effectively raising the top rate of income tax to 41%.

HSBC believes this will not prevent the Bank of England raising interest rates this year. 'Sell retail stocks, pubs and other UK consumer companies,' said Russell. 'Buy global cyclical plays such as Reuters, Anglo-American and GKN. Investors should reduce their UK holdings and invest overseas.'