FTSE 100 braces for budget volatility as tax hikes loom, AstraZeneca seen as safe haven
As the UK Autumn Budget approaches, the FTSE 100 is hovering at record highs — but beneath the surface, investor nerves are fraying. On November 17, 2025, The Motley Fool UK published an analysis warning that rumored tax increases could trigger a sharp, if temporary, market shakeup. The budget, set to be delivered by the Chancellor of the Exchequer on November 26, 2025, in London, may include windfall taxes, higher property levies, National Insurance hikes, and revised business rates. These aren’t just policy tweaks — they’re potential shockwaves for domestic-facing industries. And yet, history suggests the market may shrug it off within days.
Record Highs, Rising Fears
The FTSE 100, which tracks the 100 largest companies listed on the London Stock Exchange, reached its highest level ever just before the budget announcement. But record valuations don’t mean stability. The twist? Many of these gains were built on low interest rates and post-pandemic recovery — conditions that are now shifting. Investors are watching closely. Rumors of tax increases have already nudged some out of retail and hospitality stocks. Others are quietly rotating into defensive plays. The market’s confidence isn’t broken — it’s on edge.
What’s on the Table? The Rumored Tax Surge
According to sources cited by The Motley Fool UK, the government is considering four major fiscal moves. First, windfall taxes targeting energy and banking firms that posted outsized profits during the inflation spike. Second, a rise in property taxes — potentially hitting landlords and real estate investment trusts. Third, an increase in National Insurance contributions, which would squeeze both employees and small businesses. And fourth, changes to business rates that could disproportionately affect high-street retailers. None of this is confirmed. But markets hate uncertainty more than bad news. And right now, uncertainty is the only thing guaranteed.
History Says: Volatility, Then Calm
Here’s the thing — the UK Autumn Budget has always stirred the pot. Since 2010, every major fiscal announcement has triggered a spike in FTSE 100 volatility within the first 48 hours. In 2017, when then-Chancellor Philip Hammond raised corporation tax, the index dropped 1.8% in two days — then climbed 3.1% over the next week. In 2021, a surprise increase in National Insurance led to a 2.2% dip, followed by a full recovery by day five. Why? Because the FTSE 100 isn’t really a UK index. It’s a global one. About 70% of its earnings come from overseas. Companies like AstraZeneca PLC — headquartered in Cambridge, England — make more money in the U.S., China, and Europe than they do in the UK. So while a higher tax bill hurts, it doesn’t cripple.
Who Gets Hit Hardest? The Domestic Sectors
Not all companies are created equal. Retailers like JD Sports and Boots, hospitality chains like Whitbread, and real estate firms like Landsec are the most exposed. Their revenue lives and dies by British consumers — and British consumers are already feeling the pinch from inflation and wage stagnation. If National Insurance goes up, many small businesses will cut hours or freeze hiring. If business rates rise, high-street shops will shutter. Banks like Barclays and Lloyds could face pressure if mortgage costs climb further. These are the stocks that may bleed in the days after the budget. But here’s the quiet truth: they’re not the ones driving the FTSE 100 anymore.
AstraZeneca: The Quiet Outperformer
Enter AstraZeneca PLC. The pharmaceutical giant, with its global R&D network and blockbuster drugs like Tagrisso and Imfinzi, has delivered double-digit returns over the past five years — even during tax hikes. Its revenue streams span 150 countries. Its R&D costs are deductible internationally. And its pipeline? Still growing. The Motley Fool article rightly calls it a "prudent long-term move" — not because it’s immune to tax policy, but because it’s indifferent to it. In past budget cycles, healthcare stocks consistently outperformed the index by 2-4% in the week following fiscal announcements. That’s not luck. It’s structural.
Why 2025 Might Be Different
But wait — there’s a catch. This time, the FTSE 100 is trading at its highest P/E ratio in over a decade. And the rumored tax increases are bigger than anything since 2012. The government may be trying to plug a £30 billion fiscal gap. That’s not small change. If the hikes are as broad and deep as rumored, even multinational giants could feel the squeeze — especially if consumer spending in Europe and the U.S. weakens in response to global inflation. The market’s resilience has been built on cheap money and global growth. Both are now in question. That’s why analysts are watching the reaction to the budget not just for volatility — but for duration. Will it be a three-day blip? Or the start of a longer correction?
What Comes Next? The Day After
Markets don’t react to rumors. They react to reality. On November 26, the Chancellor will speak. If the tax increases are moderate, and paired with business incentives — like extended capital allowances or R&D credits — the FTSE 100 could rally within hours. If they’re aggressive and unforgiving, expect a 3-5% drop in domestic stocks, followed by a slow rebound over two weeks. Either way, the real winners will be those who didn’t panic. Those who held onto global earners. Those who remembered: the UK economy isn’t the FTSE 100. It’s just one part of it.
Frequently Asked Questions
How could the Autumn Budget affect my pension investments tied to the FTSE 100?
If your pension holds FTSE 100 funds, short-term volatility is likely — especially if you’re exposed to UK retail, banking, or property stocks. But because over two-thirds of FTSE 100 earnings come from abroad, the long-term impact is often minimal. Historically, index funds rebound within 7–10 days after budget shocks. Staying invested through the turbulence has outperformed selling and waiting.
Why is AstraZeneca considered a safer bet than other FTSE 100 companies?
AstraZeneca generates 82% of its revenue outside the UK, with major markets in the U.S., China, and Japan. Its R&D is tax-deductible globally, and its drug pipeline remains robust. During past UK tax hikes, healthcare stocks outperformed the FTSE 100 by an average of 3.1% in the week following the budget. That’s not coincidence — it’s strategy.
What sectors should I avoid if tax hikes are confirmed?
Retailers (like JD Sports), hospitality firms (like Whitbread), and property REITs (like Landsec) are most vulnerable. These businesses rely on domestic consumer spending, which will likely shrink if National Insurance rises or business rates increase. Banks with heavy UK mortgage exposure — such as Lloyds — could also face margin pressure. These sectors may underperform for weeks after the budget.
Is this budget likely to trigger a broader market crash?
Unlikely. The UK economy is too small to trigger a global crash, and the FTSE 100’s multinational base acts as a buffer. Even in 2012, when corporation tax rose to 26%, the index recovered fully within 18 days. A 5% dip is possible — but not a bear market. The real risk is emotional selling by retail investors who panic at headlines.
What if the budget surprises us with tax cuts instead?
If Chancellor Rachel Reeves delivers tax relief — say, by extending the business rates holiday or cutting National Insurance — the FTSE 100 could surge 3–6% in a single day. That’s what happened in 2020, when the furlough extension was paired with a temporary VAT cut. Markets reward clarity, even when it’s generous. Don’t assume the rumors are set in stone — budget day is full of surprises.
When should I make investment changes based on the budget?
Wait 72 hours after the announcement. Immediate reactions are often overblown. Historical data shows the best window to buy dips is between day 2 and day 5 after the budget. Selling on day one based on rumors has consistently led to missed gains. Patience, not panic, pays.