We’ve done a lot about how contracts for difference and spread bets are affected by the austerity budget and also about which sectors to look at. How about looking at which companies are likely to grow?
The first thing to do is to sell short companies that are dependent on government contracts. It is true that there will be a large amount of business shifted out to the private sector as this is an easy way to save money once the unions are broken, however this is not going to compensate for the cancelled expenditure and newly tough contracts that will be imposed.
This stretches wider than many people will realise. Two small examples are builders who will be hit very hard by the fall in school building and anyone exposed to the railways which will see a heavy cut in subsidies. Local government work should also be looked at as another area which will be cut back sharply. It is a certainty that local governments will be on the frontline of any cuts as they face a taxpayer revolt and lower settlements from the central government.
So what will do well? Companies with a large exposure to the private sector will do quite well. Looking at builders, it will be the house builders like Barratt, even if house prices go down as they need to sell houses rather than simply sit on high valuations. Similarly if you have an exposure to exports then you are likely to do well, particularly companies that export machinery to farmers and manufacturers.