As anticipated, Chancellor John Healey put forward a raft of packages designed to breathe life back into Britain’s struggling high streets in the Autumn Budget. His headline announcement was that the threshold for small business rate relief (SBRR) would be increased from £12,000 to £18,000, which he said would take 70,000 British businesses in the retail, leisure and hospitality sectors out of paying rates altogether.
Healey said that this would be paid for by raising tax on gambling; machine game duty will rise from 20% to 25% for higher-stakes machines. He also stated that online marketplace sellers will be targeted to ensure they can’t avoid paying VAT.
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Retail and small business experts have welcomed the change to SBRR. Warren Abbey, CEO of 365 Finance described it as a “big win for the private sector” and Jacyn Heavens, CEO of Epos Now, said it was “welcome news for the independent shops, cafés, pubs and leisure businesses that give our high streets their heart.”
Heavens added that it was important the change was implemented as swiftly as possible. “The priority now has to be making sure councils apply it quickly and that owners know to check whether their rateable value falls under the new £18,000 threshold, so this relief reaches the people who’ve been holding our high streets together,” she said.
Insolvency expert at Parker Walsh, Molly Monks, warned that for some businesses it could be too little, too late. “Financial pressure does not wait for government policy to take effect,” she said. “A business still has to pay its staff, settle supplier invoices, meet tax liabilities and cover its overheads while it waits for costs to come down.
“For a company already struggling to meet its commitments, a saving that arrives in several months may not solve the immediate problem. The key question is whether businesses have enough cash to survive until that support makes a difference.”
Gains could be wiped out by rising costs
Lucy Mangan, Partner and head of tax services at Menzies LLP, also added a note of caution. Following the Chancellor’s announcement that minimum wage would increase by 3.9%, she warned that the financial gains from rates savings for small shops could be wiped out by higher wage bills.
“With another minimum wage rise on the way, any breathing room on business rates risks knocking the wind straight back out of the businesses it is meant to help,” she said. “Higher pay for lower earners will support household incomes, but where businesses cannot absorb the cost or pass it on, the result could be fewer jobs or reduced hours rather than better-paid ones.”
She also pointed out that leaving the National Insurance threshold at £5,000 and frozen until 2031 means every rise in the National Living Wage pushes up employer contributions. Meanwhile, the change to SBRR only applies to single stores, so retailers with a small chain of stores will still be charged for each of their premises. “Business rates were built for a different era of trading, and the system still needs urgent reform to be fair to bricks-and-mortar businesses,” she said.
“No amount of relief in one corner of the economy will help if employment bills keep climbing in another, so if the Government wants businesses to grow, it needs to stop adding to the cost of creating jobs and give employers the confidence to hire again.”
Inflation to claw back minimum wage gains
In an announcement that parallels the Budget, the Office for Budget Responsibility has forecast no real earnings growth for next year, anticipating that any gains created by increasing minimum wage will be wiped out by inflation. Growth is forecast to fall to just 1%.
The question, then, is whether the measures contained in the Budget will be enough to shift the dial on the wider cost-of-living pressures facing consumers and retailers alike. Expanding SBRR will provide welcome relief for thousands of independent businesses, but it comes alongside rising employment costs and a subdued economic outlook. For many retailers, any savings on rates could be offset by higher wage and National Insurance bills, leaving them little better off overall.
That leaves the Chancellor walking a tightrope: offering support to high streets while avoiding policies that increase the cost of doing business. The Budget may ease some of the immediate pressure, but whether it delivers a meaningful boost to retail growth remains far less certain.
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