Retail reacts to the Budget: "a missed opportunity"
Chancellor Rishi Sunak revealed a temporary discount in business rates for the beleaguered hospitality and retail industry in his Autumn Budget today but the industry has responded with disappointment at the move labelling it variously as a "missed opportunity" and a "sticking plaster". Indeed the Budget, overall, seems to have left the industry feeling flat.
The 50% discount is being offered for high street business for a year from April 2022, but the Treasury is capping relief at £110,000 meaning retail chains and those with properties in expensive city centres will benefit little from the move. Other measures, such as more frequent revaluations (which will now happen every three years) and a freeze in the multiplier, were welcomed but industry experts from retail and property trade bodies, landlords and law firms were united in the view that the measures do not go far enough and a fundamental reform of the tax, which disproportionately hits businesses with a high street presence, is long overdue.
Sunak has kicked a wholesale review of business rates into the long grass for now, but it is said he has introduced the measures in today's budget to buy himself more time to look at the issue more closely and to consider measures such as an online sales tax to reduce the business rates burden.
Other measures, introduced by Sunak, such as the increase in the national living wage (welcomed by the retailTRUST for low paid retail workers), promised improvements to the visa system to help business recruit overseas talent and tax changes to encourage shipping companies into the UK were more warmly received.
However there are concerns that Sunak's approach to spending, funded by taxation, would lead to further inflation. The tax burden will reach its highest level since the early 1950s as a result of Sunak's policy decisions, which raise the overall tax burden from 33.5% of GDP to 36.2% by 2026-27.
The Chancellor asserted that his “goal is to reduce taxes” by the end of the current Parliament in 2024 but former Prime Minister Theresa May was among those calling for assurances on this and for a debate on whether inflation was just temporary or here to stay.
“Increased taxes will have both a direct and indirect impact on individuals, as will increased costs in other areas," she said. "We must never forget, as the Labour Party so often does, that if you increase taxes on business it isn’t the case that people are not hit by that because those increased costs often can’t be absorbed and are passed through to consumers, passed through to members of the public.”
Key industry reactions
The retail industry body
British Retail Consortium CEO Helen Dickinson OBE
“Today, the Chancellor spoke of a new age of optimism, but retailers will struggle to share his confidence after a Budget that does not do enough to reduce the burden of costs bearing down on our shops, our high streets and our communities. This budget is a missed opportunity for retail and the three million people who work in the industry, and it prevents retail from maximising its contribution to the government’s levelling up agenda.
“With firms still stuck on property valuations from 2015, the move to a three-year revaluation cycle, supported by a properly funded VOA, is welcome and is a clear acknowledgement that rates have fallen well out of kilter with the wider property market. The freeze in the multiplier is positive, though the evidence is clear that the current rate – over 50% in England – is already far too high.
“We also welcome the property investment relief and green investment relief, both of which the BRC has called for, which will provide some support for much needed investment in green technology and property improvements.
“While the Government’s 50% bridging relief for 2022/23 may prove to be beneficial for the smallest businesses, it will do little to support the businesses that pay two thirds of retail business rates and employ 1.5 million people. With no reduction in the burden, this will lead to the unnecessary loss of shops and jobs and fails to incentivise investment in all parts of the country. This is bad news for every member of the public who wants a vibrant high street in their local community, with retail at its heart.”
The property industry trade body
British Property Federation CEO Melanie Leech
“The package of measures the Chancellor has announced on business rates relief will bring some welcome temporary relief to our high streets but demonstrate how badly further, fundamental reform is needed.
“While a move to three-year revaluations is welcome, we continue to urgently call for annual revaluations. Businesses need to see long-term reductions in the rates they pay rather than short term fixes. The current practice of downwards transitions needs to end and would give high streets an £8.5bn boost and enable them to forward plan and protect jobs.
“We are pleased that the Chancellor has also responded directly to the BPF’s call for business rates relief to encourage building improvement and to support the transition to net zero. This will give a significant boost to investment in revitalised, more sustainable town centres.”
The commercial property law firm
Katten Muchin Rosenman LLP, real estate partner, Peter Sugden
“This is an extremely disappointing Budget for the commercial property sector. The pandemic has exacerbated the existing severe hardships already felt by the high street pre-COVID and yet disappointingly there has still been no reform to business rates. The industry has been lobbying the government for years, pre-pandemic, to help with these problems but has been completely ignored.
"Like the government’s recent retreat from introducing major planning reform, the budget does nothing to help address the enormous challenges being faced around changing commercial property demand in City and Town centres.”
The London business trade organisation
New West End Company CEO Jace Tyrrell
“It's encouraging to see the Chancellor finally act upon the need to reform the business rates system. Cancelling the inflation-linked rise to the multiplier may ensure that rates won’t go up this year, but they are still too high.
“A 50% discount for the retail and hospitality sectors will help some struggling high street businesses, but not all. By capping the 50% high street discount at £110,000, the benefit means little to city centre businesses. For a store in London’s West End, it will result in less than a 1% cut in their business rates bills for just one year.
“This only results in a cut of around £1bn each year on a £25bn business rates bill - the equivalent of a 4% cut. This falls far short of a fundamental review and is a very disappointing outcome."
“It does little in the long term to meet the Government's manifesto commitment to reduce the burden of business rates.”
The real estate firm
Colliers head of business rates John Webber
“After delaying his response four times in the last year, the Chancellor has yet again missed a golden opportunity to reassure businesses and to instigate the fundamental reforms campaigned for and needed- particularly for the beleaguered retail sector.”
“There were some positive announcements today – but overall, the Chancellor’s measures were 'underwhelming'. The Chancellor has made it clear he is determined to continue to raise £25 billion from this tax and as a result his proposals only tinker with the system. The measures suggested will not have a major impact on saving the high street in the longer term.
“Whilst we support more frequent valuations, already mooted in the Summer, we would prefer to see annual revaluations- so that rates are a closer reflection of current rental values. We also need to see what caveats the Government has introduced alongside its proposals. If the Government, as mooted, imposes a duty on rate payers to supply detailed information to the VOA about their properties on an annual basis for these valuations, this will provide considerable paperwork and an extra administrative burden on businesses.
"The 50% discount in rate bills for Retail, Hospitality and Leisure Businesses for the next 12 months from April 2022 is a 'sticking plaster'. The government is limiting reliefs to a maximum of £110,000 – so again this will not help the bigger retailers – the ones making the major decisions on opening or closing stores and maintaining jobs. This will have limited benefits. Retailers will still be facing the cliff hanger of an unfair rating system in 2023 when new rate bills fall."
The retail charity
The Retail Trust CEO Chris Brook-Carter
“Financial stress can cause a range of mental health issues so we very much welcome the increase in national living wage in today's budget. This has the potential to provide much-needed relief for thousands of retail workers who have faced extraordinary financial, physical and emotional pressures over the last year and a half.
“As a charity, the Retail Trust has given out £1.2million of non-repayable financial aid since the start of the pandemic to help people working in the industry to pay bills and keep a roof over their heads. We have also run more than 11,000 counselling sessions for those struggling with mental health challenges.
“Our only hope is that the increased wages bill that will follow doesn't lead to more job losses or retailers having to close more stores. Retail employment is absolutely vital in tackling issues like social mobility and supporting young people into jobs and training so the measures announced around business rates will be really important when it comes to helping retailers’ ongoing recovery from the pandemic.”
The shipping and logistics expert
ParcelHero Head of Consumer Research, David Jinks
“Promised improvements to the vexed visa system should help businesses that need to employ more oversees talent. The Scale-Up Visa system should ease the strain on tech and manufacturing businesses and ensure no more sectors come to blows with the Government over attracting enough skilled overseas staff post-Brexit.”
“That still leaves the driver shortage, which is an immediate problem, though it’s just the tip of the iceberg in terms of the impact of Brexit on the UK’s freight infrastructure. There are still many issues that the Budget has failed to resolve.”
“The tax change to encourage shipping companies to the UK could attract more of the world’s largest shipping companies to UK shores. Ships flying the UK Red Ensign will pay less tax by paying based on the amount they carry, rather than the profits they make. The more firms within the UK regime, the greater the gain for the UK’s economy, with the shipping sector supporting more than 670,000 jobs.”
The taxation think tank
Centre for Policy Studies Head of Tax, Tom Clougherty
"The Budget contained some welcome, pro-investment announcements on business rates, although the more fundamental reforms that Britain's businesses need have been ducked for now. But we can't ignore the bigger picture. The Government has already announced two huge tax increases this year, with the tax on individual earnings set to rise in 2022, and the tax on corporate profits slated to increase in 2023. Had those policies been revealed at this Budget, the headlines would be very different. For all the Chancellor's nods to economic growth, low taxes, and a limited state, we are still going to have the highest tax burden since the post-war period, and we still face a massive corporate tax cliff edge in April 2023."