Retail reacts to the Spring statement: "unsustainable business rates burden" continues
Rishi Sunak slashed fuel duty, raised national insurance thresholds and promised a cut in income tax as forecast economic growth was downgraded.
The Chancellor offered help through the tax system for millions of workers as the cost-of-living crisis and war in Ukraine hit the economy. Sunak shielded lower earners from the impact of the forthcoming national insurance hike, cut 5p off fuel duty from Wednesday evening and promised to cut income tax by 1p in 2024.
Subsequently, economic growth forecasts were downgraded and inflation is set to reach its highest level for 40 years, leading to household disposable incomes falling by 2.2% per person in 2022-23.
The Office for Budget Responsibility (OBR) downgraded growth in gross domestic product – a measure of the size of the economy – from the 6% forecast for this year at the time of the Budget in October to 3.8%.
Key experts across the fashion and retail industry reacted to the planned changes:
Helen Dickinson, Chief Executive of the British Retail Consortium, said:
“Last week, we wrote to the Government to call for reform to the Apprenticeship Levy. By improving the flexibility of the way Apprenticeship Levy funds are spent, the government could help create thousands of new retail apprenticeships. We are heartened to hear that the Chancellor has heard our concerns and is set to examine whether the Levy could be improved, to allow businesses to invest in the right training. We urge him to introduce measures which allow high-quality short courses in functional skills, allow Levy funds to cover associated training costs, and allow a wider range of courses to be supported.
“The Chancellor also announced an initial cut to National Insurance Contributions that will save households around £300, with a further cut to income tax in 2024. This reduction will come as a welcome relief for consumers at a time when households across the country are squeezed by the cost of living crisis. Nonetheless, with the energy price caps rising in April, and inflation now running at a 30-year high, households are likely to see a fall in their discretionary income over the course of 2022.
“The Chancellor announced reforms to research and development tax credits to support business investment and increase productivity. However, if he wants to increase investment by retail businesses that would create jobs, increase productivity, and benefit towns and high streets, he should also focus on bringing down the unsustainable business rates burden. Currently, retail businesses pay 25% of all business rates, despite accounting for 5% of the economy. The announcement of a 50% relief is a welcome help to small businesses but will have little impact on the industry’s £8 billion business rates bill.
“Better news was given through the announcement that the ‘green investment relief’, that supports environmental property improvements, will be brought forward. This will support the investment the industry is making to become net zero by 2040, ten years ahead of the government target.”
Chris Brook-Carter, Chief Executive Officer of retail industry charity the Retail Trust, said:
“We are very concerned about the impact that the rising cost of living is having on the millions of retail workers that the country has relied on throughout the pandemic but who are now struggling to make ends meet. Measures such as cutting fuel duty and raising the National Insurance threshold for lower earners should provide some relief for people now forced to make difficult decisions about whether to use money to pay for food, fuel or cover their rent and other bills.
“Retail has been hit hard by the pandemic, causing unprecedented job losses and a number of other financial and emotional pressures, leaving many people needing financial aid and mental health support and disillusioned about working in the sector as a result of the uncertainty of the last few years. The industry and the government must work together to provide its workforce with security, stability and a real sense of purpose in order for retail to recover and continue to play a vital role in the UK’s economy and tackling issues like social mobility and youth employment.”
John Webber, Head of Business Rates at Colliers, said:
“Although this was primarily a “consumer led” Spring statement addressing issues such as costs of living rises and high energy bills, it was disappointing that the “elephant in the room”, business rates was largely ignored, despite the impact that ultra-high rates bills has had on businesses in recent years.
“The Chancellor re-iterated the 50% business rates discount for the retail, leisure and hospitality sector as of April 1st but with a cap of £110,000 per company, this will only support the smallest businesses in the sectors and will do little to help the larger companies who account for the majority of jobs. Any support to businesses in other sectors of the economy was also totally lacking.
“Longer term, in terms of the retail and hospitality sector, we do have a rating revaluation in 2023 to look forward to - whereby rates bills will based on rental values of 2021- and this should hopefully mean bills will come down for many in these struggling sectors. But this will be meaningless if the government does not allow business rates reductions to be implemented immediately rather than spreading them over the years of the list in a transitional arrangement as it did in the last list of 2017.”
Jace Tyrrell, New West End Company Chief Executive, commented:
“Whilst the widespread support that the Government has provided to the retail and hospitality industries over the last two years has been vital for their survival, rising operating costs and inflation could hamper progress and threaten business recovery. We will continue to campaign Government to ensure that the potential policy changes to cut tax rates include critical investment for city centre businesses, such as public realm developments, ahead of the Autumn budget.”
“In the meantime, to support the recovery and growth of city centre businesses, we are continuing to urge Government to reconsider the removal of tax-free shopping, relax Sunday Trading laws, and make it easier for tourists to visit our shores by streamlining the visa process. The return of high-spending international visitors to the high street, who have been absent for far too long, is also one of the most important changes that can be made to tackle rising costs. Only with the removal of these unnecessary hurdles can viable retail and hospitality businesses across the country thrive once again.”
Robert Schuijff, CEO at consumer finance provider Etika, added:
"This year's Spring Statement comes when UK families see their income stretched as the rising cost of living and inflation continues to bite. But, at the same time, face the growing cost of lending with interests now at 0.75%—a double whammy for consumers.
"A YouGov survey, commissioned by Etika, has found that 16% of UK consumers already feel the impact of credit declines on their mental health. So retailers and lenders need to be able to strike a balance between encouraging purchases and properly means-testing for affordability. This approach provides a win-win situation for retailers and their customers."