Budget 2021: Retail, property and fashion industry figures respond
Chancellor Rishi Sunak laid out his hotly anticipated Budget today outlining how he plans to get the economy back on its feet following the trauma of the Covid-19 crisis.
The retail industry had been hoping for an extension to the business rates holiday, which was due to end in April and this was duly extended to the end of June with a two-thirds discount for the remainder of the year. A more thorough review of business rates in planned in the autumn when, it is hoped, the unfair burden on retailers will, finally, be relieved.
Also to be welcomed are the extension of the furlough scheme and the restart grants will enable non-essential retailers to access up to £6,000 to help kickstart business after prolonged lockdowns, while an increase in contactless payments to £100 might encourage higher spending in stores, when they are due to re-open on 12 April.
An increase in corporation tax may not be so welcomed but ASOS CEO Nick Beighton, for instance, says his group is ready to pay more to support economic recovery and welcomed the Chancellor's additional measures for industry. "We welcome new and continuing support for businesses to help fuel the country’s economic recovery and believe it’s only right that successful, profitable businesses make an additional contribution without stifling growth, investment and innovation. As a UK-based and tax domiciled business, ASOS will meet in full our contribution to the future increase in Corporation Tax, as well as investing £90m and creating 2,000 new jobs at our state-of-the-art fulfilment centre in the Midlands.”
So, a strong, profitable company (with no high street presence) like ASOS is happy, but were the Chancellor's measures (for a summary click here) enough to draw wider industry support? Or do they just delay the inevitable for the more distressed businesses in the market.
Below, we gather the views of leading figures representing retail, fashion, property, business and retail workers.
British Retail Consortium CEO Helen Dickinson
“The Chancellor has listened to many of our concerns and we welcome the extension of key business funding schemes. This announcement provides some targeted support to struggling businesses across the country. Action to support the retail industry will be vital to reviving the economy – including business rates relief, restart grants and loans, and an extension to the furlough scheme. However, for many retailers the devil will be in the detail, with caps on funding limiting access to this support. Retail accounts for over three million jobs, spread across every region of the UK; supporting the success of our industry will be essential to unlocking consumer spending and driving forward the UK’s economic recovery. The Chancellor must keep the situation under review, as we wait to see how the economy responds to reopening.”
On Business rates:
“The Chancellor has taken steps to avoid the business rates cliff edge on 1 April, and the three-month extension will provide essential funding at this challenging time. Beyond this point, relief is capped at only £2m for closed businesses, a tiny fraction of their total liability. Without further funding, it is likely that many ‘non-essential’ retailers will struggle under sluggish consumer demand and high Covid costs. The business rates system remains broken; it is vital that the ongoing business rates review delivers on its promise to reduce the burden on retail which already results in store closures and job losses.”
On Restart grants:
“Restart grants provide a vital injection of funding during this extremely challenging period. No businesses have remained untouched by the pandemic and we welcome this cash to help ‘non-essential’ retailers improve safety measures, build up stocks, and prepare for reopening. However, the Chancellor gave no clarity on EU state aid rules - if these continue to apply to grants for closed businesses, then many larger companies, employing hundreds of thousands of people, will miss out on millions of pounds of vital support. We need an immediate amendment to the state aid system which is stopping impacted companies from accessing the grants which were announced today, and earlier this year.”
On Recovery loans:
“We hope the loan scheme will play an important role in addressing the cash flow challenges that many firms are facing. But it is vital that the aspirations of the Chancellor are met by action from commercial lenders to ensure that this all important finance reaches its destination quickly.”
On Furlough extension:
“We welcome the extension of the furlough scheme, which provides retail colleagues with a safety net against unnecessary job losses. This generous scheme will help protect the future of the 600,000 retail employees currently on furlough.”
“We understand the need for increased taxation to restore public finances and cover some of the vital spending on business support. Corporation tax is a fairer way to achieve this as it ensures those with the broadest shoulders take the largest burden. However, increases in corporation tax must go hand in hand with bringing business rates down to a sustainable level and prevents the shuttering of many more local shops. On its own, corporation taxes would just be another tax on an industry that has faced rounds of forced closures, high costs of implementing Covid-safety measures, and the recent scrapping of tax-free shopping. It is vital that the ongoing business rates review meets its objective to reduce the rates burden on retail, which is causing stores to close and jobs to disappear.”
“The additional incentive to take on new apprentices is welcome, but what is most important to the success of such training and the upskilling of our future workforce would be greater flexibility in how firms are able to spend their Apprenticeship Levy funds."
On Investment and Digital:
“The UK retail industry is a global leader in digital innovation and online retail has provided a vital lifeline for many households across the country over the course of this pandemic. Support for businesses to improve digital skills and develop their online offering will boost an already dynamic sector.
“The 'super-deduction' must include investment in new technology. The UK retail industry’s investment in digital innovation, which is already world-beating, could be further boosted if this is tailored appropriately. This in turn will create more high value jobs and added value for UK plc.”
British Fashion Council CEO Caroline Rush
On furlough extension and self-employed support:
“The British Fashion Council (BFC) welcomes the announcements in today’s budget that will enable businesses and workers to recover from the effects of the pandemic including the extension of support schemes to September, the continuation of the furlough scheme, the fourth Self-Employment Income Support Scheme (SEISS) with the inclusion of “newly” self-employed, and notably the support to retail including continued rates freeze and £5bn in Restart Grants for the retail sector. We encourage responsible retail, ensuring that the benefits of this support are passed on through the value chains to suppliers, designers, and workers within them.
“A report by Oxford Economics for the BFC has shown that the impact of COVID could be twice as hard on the fashion industry than the economy as a whole, therefore collective action is required to ensure recovery and positive growth of the industry as there are many businesses and workers that fall outside of the government support measures."
On Support for sector specific skills and innovation:
“We continue to discuss with the government the importance of the needs of the fashion industry, such as the movement of creatives through a fashion quarantine exemption and a “touring” visa to work in key EU markets; support for freelancers; a review of the Shortage of Occupation List to include skilled fashion workers and the need for government-backed event insurance to allow us to restart with certainty. As our industry moves to a clean growth strategy, it is essential that the government supports through investment in innovation and R&D as a priority.
“The combined devastating effects of the pandemic and Brexit have had a greater negative impact on the fashion sector than most, and therefore we call on urgent action by the government to support the industry to play its role throughout the UK in its economic recovery.”
New West End Company CEO Jace Tyrrell
“The Chancellor’s announcement of substantial economic support should be broadly welcomed. However, it delivers too little for major commercial centres missing out on tourism and office workers where rebuilding traffic, trade and tourists will require years of effort. Targeted relief and support is needed for centres such as London, Birmingham and Manchester, where recovery will take much longer. It cannot be a one size fits all approach.
“For the Government’s support to be successful, we must also be given more clarity around the issue of state aid in the wake of our departure from the EU so that businesses with multiple stores can be sure that they won’t miss out on funding due to regulations on state aid cap.”
On Business rates:
“This was a budget billed to help business build back and we welcome the three month extension to the business rates holiday that will be a lifeline to many businesses as we reopen. However it delivers too little for major commercial centres missing out on tourism and office workers where rebuilding traffic, trade and tourists will require years of effort. Targeted support now from the public purse will accelerate the recovery of commercial centres such as London and Manchester, halving the time it will take for them to get back to becoming net contributors to the UK economy.
On State aid:
“The three month extension to the business rates holiday will be a lifeline to many businesses as we reopen, however if business rate relief is to be successful, we must be given more clarity around the issue of state aid so that businesses with multiple stores can be sure that they won’t miss out on funding due to EU regulations on state aid cap.
“In truth, while this has been a generous budget, it remains limited when subject to small print. Unless the Chancellor works to overturn state aid rules, centres such as London and Manchester risk losing their lead as world class destinations to Paris and Milan.”
On International spend:
“The reopening of overseas tourism must be a two-way street; allowing Brits to holiday and spend overseas must be matched by welcoming back priority overseas tourists who account for 50% of the West End’s annual £10 billion turnover. Those that benefit commercial centres the most - in the Middle East, Far East and US - must be encouraged back to boost the British economy and its businesses and we hope to hear more clarity from the Government on this issue in the near future.”
British Property Federation CEO Melanie Leech
“While Covid-19 has taken a devastating toll on public health, the economic scars will no doubt also run deep. Recovery will require the Government to be bolder over the next year, particularly to meet its ambitions in relation to decarbonisation, but today’s Budget will have provided confidence to hard-pressed businesses on our high streets that government support is far from over, and that they won’t be left to fall at this final hurdle as we emerge out of lockdown.”
On Business rates:
“The extension of the furlough scheme, £5bn of re-start grants and the business rates relief extension will bring many retail, hospitality and leisure businesses back from the cliff edge, providing them with much-needed breathing space as they prepare to re-open their doors to the public.
“Longer-term town centre recovery, however, will require root and branch business rates reform. This can has yet again been kicked down the road, but fixing business rates is fundamental to any ambition that wants our high street businesses to start planning for their futures beyond the next few months.
“The business rates system is clearly broken. Business rates should be responsive in real time to market changes – rather than based on historic, out-of-date rental values – so that they are fair and sustainable. Government has had long enough to reflect on how business rates could be improved. When temporary relief ends, the Government must be ready with a new regime which best future-proofs the system as our economy continues to evolve.
“The Chancellor has provided a significant package of additional support for retail, hospitality and leisure which should give the minority of businesses who have not yet engaged with their property owners a platform to do so. Property owners – local authorities, pensions and savings funds – are owed more than £5bn and have had no direct support from Government. That cannot continue and those funds are urgently needed to invest in the recovery of our town centres.
“Everyone agrees the majority of tenants and property owners are working well together – with tenants being transparent about their finances, and property owners supporting those in distress with emergency relief and new, longer-term rent payment arrangements. New, stronger relationships have been built through this process. Nevertheless, there is a minority where relationships have broken down and become toxic, and the moratorium must end to unlock the stalemate and allow the market to re-set and recover.
“With further rates relief and new grants, high streets businesses should be confident in approaching their property owners today to forge an economic partnership in which they can agree how to manage rental debt fairly . Rational property owners will not want to evict – empty properties generate no income and are a blight on our high streets.
“Those well-capitalised businesses, who can pay rent but have chosen not to, must now meet their legal obligations. Their behaviour has raided our nation’s pensions and savings invested in commercial property, and has been a heavy blow for already stretched local authority landlords and public finances.”
On Corporation tax:
“While we are still in lockdown, now might not seem like the best time to hike taxes – but, with government borrowing having already reached record-breaking amounts, it’s inevitable the Chancellor will need to find ways to raise revenue. A rise in corporation tax is a reasonable option, given it’s a tax on profits and so will predominantly target those businesses that have fared better. Plus, the UK’s corporation tax has been relatively competitive since it was lowered from 26% to 19% in 2015, and today’s rise will bring the UK closer in line with countries such as the US.
“It is however disappointing the new super reduction does not apply to new investment in the structure of buildings, which will be much-needed for town centre regeneration and to support our net zero carbon goals for the built environment.
“It’s positive that the Chancellor has provided more flexibility to make use of losses and claim tax relief on those more quickly, but we continue to have concerns in relation to how corporation tax profits are calculated. In particular, large-scale real estate and infrastructure projects depend on large volumes of debt, and interest payments on this debt should receive full relief as has traditionally been the case in the UK. Restricting this relief to 30% of a business’ earnings will put at risk the sort of investment that will regenerate our towns and cities, and underpin recovery. It is important that these corporation tax rules are reviewed to ensure that only those businesses making genuine economic profits are footing the bills for higher corporation tax bills.
On Empty business rates:
“The Chancellor has equally ignored calls to abolish empty business rates. It is fundamentally unfair that after having supported businesses so extensively and for so long, property owners are then left footing the business rates bill when stores are left empty. Our tax system must not penalise property owners for having empty stores, when their support has been critical to saving as many businesses and their stores as possible throughout this pandemic.
“Of course, despite government and property owner support, stores are still closing. But, with over 16,000 store closures in 2020, charging empty rates takes investment capital from the very stakeholders that want to invest in repurposing and reimagining our high streets.
“The Government needs to unleash the power of the private sector. This is crucial to the success of the levelling up agenda and the reinvigoration of town centres, for unless ministers are prepared to think radically around the mechanisms that will unlock private sector investment, the government’s ambitions will fail.”
Chris Brook-Carter CEO retail industry charity retailTRUST
On Furlough extension:
“We welcome the promises of today’s Budget announcement and the desperately needed certainties that it provides the UK’s more than four million retail workers.
"Extending the furlough scheme will safeguard roles during the uncertain reopening period, while extending the business rates holiday and providing access to the new restart grant will help get retailers back up and running so that staff can get back to work as soon as possible.
"Retail will have an absolutely vital to role to play in tackling issues like youth employment and social mobility as we move out of this crisis so decisions taken now will not only protect vital jobs and businesses, but the social, economic and cultural importance of the sector to the UK.
"People working in retail have been hit hard financially, emotionally and physically during the entire course of the pandemic. They have had to cope with extremely difficult changes in their working conditions, livelihoods have been placed on hold during the lockdown periods, and, very sadly, tens of thousands of people have been left with no jobs to return to due to the pandemic’s devastating impact on shops and businesses up and down the country. This has led to record demand for retailTRUST’s services.
"It is essential that the government and businesses now work together to safeguard our colleagues’ long-term interests and their wellbeing. And as a sector, we all have a responsibility to come together and make the most of initiatives which will help to protect, support and create roles."