As the dust begins to settle on yesterday’s Autumn Budget, there has been a mixed reaction to it from across the business sphere. The financial markets reacted largely with relief and stability to a Budget that has been described as “boring” by some analysts, but there was some frustration from the retail sector.
Helen Dickson, chief executive at the British Retail Consortium, described Chancellor John Healey’s headline announcement on business rates as “smoke and mirrors.”
“The Chancellor’s headline announcement that he will ‘freeze [retail, hospitality and leisure] rates in real terms’ means a 3.5% increase – another body blow to high streets already struggling with rising costs and empty units,” she said.
“It will add around £250 million to retailers’ bills next April as one in seven shops lies empty. And while we welcome the decision to remove 70,000 small high street businesses from paying business rates altogether, the overwhelming proportion of employment and rates come from the 500,000 medium and larger retail outlets whose bills will go up once again.”
Youth unemployment not effectively targeted
Dickson also highlighted the above-inflation rise to minimum wage and lack of reduction to employer’s National Insurance Contributions, which she said are likely to contribute to ongoing youth unemployment. “Retailers want to pay colleagues well, but Government cannot ignore the fact that today’s announcement adds another £2 billion on top of the £6.5 billion in additional employment costs that retailers have faced over the last two years,” she said.
Charlotte Bosworth, CEO at one of the largest vocational and apprenticeship training providers in the UK, Lifetime Training, agreed with Dickson that the Chancellor missed the mark regarding youth employment, despite Healey increasing the apprentice minimum wage. “[The] Budget was a missed opportunity to provide business rates relief for larger retailers at a time when the cost of creating and sustaining jobs remains under significant pressure,” she said.
“If the Government wants retailers to create more opportunities for young people, it needs to tackle the cost of creating those vacancies for all businesses. Apprenticeship incentives and more affordable training can only go so far if businesses lack the financial confidence to recruit.”
Rising costs wipe out gains
Thomas Hill, former Asda pricing lead and co-founder of HyperFinity, also agreed that the Autumn Budget lacked the balance needed to juggle the rising cost of living for workers with soaring costs for retail businesses. “The rise in the minimum wage may help put more money back in consumers’ pockets to spend, but it won’t be welcomed by small businesses already facing rising costs,” he said.
“Creating growth requires a careful balance of investment in the economy without placing an excessive burden on retailers. As fuel prices and winter heating bills kick in, the increase in relief still doesn’t feel enough to give smaller independent retailers the boost they need. Larger retailers will feel the impact of higher wages without benefiting from the expanded rates relief, meaning it will take more to level the playing field. The current approach does little to address the advantage enjoyed by large online players, leaving value retailers such as Primark under particular pressure as they try to keep prices low while competing with the likes of Shein.”
However, Healey’s decision to ensure marketplace sellers can’t avoid VAT was more broadly welcomed. “Healey’s decision to make online marketplaces liable for VAT collection on behalf of sellers from October 2027, using that money to cut business rates on the high street, is a welcome step towards a fairer playing field,” said Kristaps Zips, UK CEO, payabl. “Compliant businesses shouldn’t lose out to those not paying the VAT they owe and the new rules must be simple for the many small merchants who sell both online and in-store.”
Still much more to do
Prime Minister Andy Burnham has said that he doesn’t expect this Budget to “fix everything” and has admitted that he knows “how much more there is to do” – a remark that may be interpreted as signalling the government’s appetite for further reform over the longer term.
But, while there were no major shocks in the Autumn Budget, many retail experts do not feel it goes far enough in making the changes to the cost of doing business for which they had hoped. Whether it makes a significant difference to consumer confidence, which retailers would also welcome, remains to be seen.
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