The upcoming UK Budget on 28 October could create some interesting opportunities for FTSE 100 investors. Chancellor John Healey faces the difficult task of supporting economic growth while keeping the public finances under control.

With tax increases and targeted spending measures potentially on the table, I think certain sectors could emerge as winners while others face fresh pressure. Here’s one stock I think could do well and one to consider avoiding.

A potential winner

One company I think could benefit from the Budget is Barratt Redrow (LSE:BTRW), one of Britain’s largest housebuilders. The stock is down 24% over the past year.

The government has already announced plans for a new first-time buyer support scheme called Your First Home, with further details expected in the Budget. Under the proposed arrangement, eligible buyers could purchase a new-build property with a deposit of just 2.5%, supported by a government equity loan worth 20% of the property’s value.

For Barratt Redrow, this could be significant. Affordability remains one of the biggest obstacles facing first-time buyers. Making it easier to get onto the property ladder could increase demand for new homes, helping the company improve sales volumes and potentially reduce the incentives it currently offers customers.

There’s also an opportunity for the business to improve profitability through integration savings following the Barratt-Redrow merger.

Its latest annual results showed revenue rising 6.6% to £6.06bn, although adjusted pre-tax profit fell 7.1% to £572.8m. The company also finished the year with £773m of net cash, providing financial flexibility.

However, there are risks. Higher mortgage rates could offset the benefits of government support, while construction costs and weaker consumer confidence remain challenges.

Losing the flutter

One FTSE 100 stock I think could come under pressure following the Budget is Lloyds Banking Group (LSE: LLOY). Although the bank has enjoyed a strong period of profitability (the stock is up 24% in the last year), I’m concerned that the Chancellor could introduce measures that negatively impact its earnings.

The biggest risk is a potential increase in taxation on banks. The government is reportedly considering raising the existing bank corporation tax surcharge, currently set at 3%, or introducing some form of windfall tax. With the Treasury looking for ways to raise additional revenue, the banking sector could find itself in the firing line.

Lloyds looks particularly vulnerable because of its heavy exposure to the UK economy. Unlike HSBC and Barclays, which generate substantial profits overseas, Lloyds earns the vast majority of its income domestically. This means any increase in UK banking taxes would have a more concentrated impact on its bottom line.

To illustrate the potential hit, a five-percentage-point increase in the surcharge could cost Lloyds around £400m annually, assuming £8bn of taxable profits. That’s a significant amount of money!

Of course, there are reasons to remain positive. Lloyds has benefited from resilient lending margins, improving efficiency and a strong capital position. There’s also the possibility that the Chancellor decides against increasing banking taxes. If this happens, Lloyds shares could enjoy a relief rally as investors reassess the outlook.

Nevertheless, I think the risks are high ahead of the Budget. While I remain positive about Lloyds over the longer term, I’d be cautious about buying the shares immediately before an announcement that could materially affect future profitability.

Should you invest £5,000 in Barratt Redrow right now?

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Jon Smith has no positions in the shares mentioned.