Yesterday’s so-called “Budget for growth” received a lukewarm response from retail industry bodies and commentators.
The Federation of Independent Retailers (the Fed) noted that the Chancellor’s statement failed to address a number of factors that are threatening the existence of many smaller retail businesses.
A major disappointment was a lack of support on high energy bills. And while a continued freeze on fuel duty was of some comfort, Jeremy Hunt’s hike in tax on alcohol and tobacco was seen as another blow to the sector.
The Fed’s National President Jason Birks said: “I and other trade associations wrote to the chancellor and the business secretary just last month imploring them to provide the necessary help for struggling small businesses. It is, therefore, extremely disappointing that our calls for assistance have not been answered.”
Birks said the tax rises on alcohol and tobacco will also lead to an increase in illicit trading, which again is harmful to honest shopkeepers and fuels organised crime.
He added: “The chancellor has shown a complete disregard for shops that are the lifeblood of their local communities. I make no bones about it – we will see many forced to close their doors for good as businesses become unviable in the current economic climate.”
James Lowman, Chief Executive of the Association of Convenience Stores (ACS), backed these sentiments: “A Budget focused on growth and investment will come as no comfort to those who will have their entire profit margins wiped out this year by excessive fixed energy contracts. Convenience stores have been left out in the cold by the Chancellor, being left to face crippling energy bills by themselves and putting thousands at risk.
“Difficult decisions will have to be made in the coming months by independent retailers about the future of their businesses, which will have a negative impact on investment and reduce the number of available jobs in communities, all while bolstering the profits of energy companies.”
Helen Dickinson, Chief Executive of the British Retail Consortium (BRC), commented: “In the face of volatile demand caused by high inflation and low consumer confidence, measures to support households with the cost of living, such as the ongoing energy bill support and changes to childcare costs, are welcomed. However, many businesses are weighed down by a myriad of higher costs right through the supply chain.
“Government must do more to limit one of the biggest drags to retail investment, which is oncoming regulatory burdens heading down the track, or risk a crash in business investment and further inflationary pressures.”
She added: “The Chancellor understands the need to train people to re-enter the workforce, yet he missed a key opportunity to fix the issues with the Apprenticeship Levy system that would support this very goal. Over the last three years, businesses have lost £3.5bn in unused Levy funds. To break this cycle of wasted investment, it is vital that government allows businesses to use their hard-earned Levy funds for a wider array of skills courses.
“The broken Business Rates system remains a drag on business investment, jobs, and economic growth. Rates must be paid in full whether firms are making a profit or a loss. This makes Business Rates the final nail in the coffin for many struggling stores; shutting shops, costing jobs and preventing new stores openings. The Chancellor should make good on the Conservative 2019 pledge to reform Rates and lay out a clear roadmap for future reforms.”
Meanwhile, wine and whisky producers accused the chancellor of inflicting a “historic blow” on their industries with the highest tax increases in nearly 50 years.
Hunt did unveil a surprise ‘Brexit pubs guarantee’ that will keep the levy on beer and cider up to 11p lower than shop-bought alcohol. However, drinkers will see the duty on other alcohol soar by 10.1% in August, in line with inflation after a freeze during the peak of the cost of living crisis.
The Wine and Spirit Trade Association (WSTA) said the changes will mean that duty on a bottle of still wine will go up by 44p while a bottle of vodka could rise by 76p. For fortified wines, the increase will be even greater, with port potentially rising by £1.30 a bottle.
Miles Beale, Chief Executive of the WSTA, said the government was “punishing” businesses and consumers with “the largest increase in wine duty since 1975”.
“What does the government have against people who choose to produce and drink wine?” he said. “These crippling inflationary tax hikes will be lumped on top of stealth tax rises for some alcoholic products, which the government has built into the move to taxing alcohol by strength.
“After all the effort to relaunch hospitality supply chains in 2022, the government is offering no help in 2023 for the wine and spirit trade – and particularly for the UK’s 33 million wine drinkers who will see their – and the nation’s – favourite drink hit with a 44p duty rise in the midst of a cost-of-living crisis.”
The Scottish Whisky Association (SWA) also claimed the rise in alcohol duty would be the “largest tax increase for decades”. Its Chief executive Mark Kent said: “It’s bad news for the consumer, it’s bad news for inflation, bad news for spirits, bad news for scotch and bad news for Scotland, which produces 90% of all UK spirits.”
Meanwhile, Amber Mace, EY’s Consumer Products & Retail Sector Leader, was slightly more upbeat on the budget, saying: “The Chancellor’s announcement of full expensing of capital expenditure for the next three years will be welcome news for consumer products and retail businesses, with the move at least partially offsetting the corporation tax rate rise from 19% to 25% next month.
“Towns and cities that are dependent on their high streets have been particularly affected by the squeeze on consumer spending, but details of 12 new proposed UK Investment Zones could see accelerated development, time-limited tax benefits and wider support for local growth within towns and cities across the UK. This, combined with overseas R&D costs remaining allowable for another year, should also have a positive impact for the sector.
“The labour market measures also appear supportive, with retail likely to welcome childcare reform in helping both current employees and others looking to return to work – although the benefit will not be felt for some time given the staged roll-out.”
NAM Implications:
- The underlying question has to be:
- “To what extent are the government interested in preserving local indy retailers…
- …and Community Pharmacies?”
- Not to say continuously bailing them out (like banks?)
- But making it possible for them to trade profitably…
