Chancellor Rishi Sunak has offered a glimmer of Christmas hope for retailers, looking to reform business rates, offering help for HGV operators and cutting fuel duty– all of which could shave off costs for retailers and improve supply chains in time for peak.
He has also raised the minimum wage to £9.50 per hour whilst the Universal Credit taper was cut from 63 to 55%, meaning that consumers may also have slightly more economic confidence when it comes to spending.
There is to be no ecommerce tax.
Responding to the Budget, Helen Dickinson OBE, Chief Executive of the British Retail Consortium (BRC), says: “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.”
So what has Sunak done for retail?
Business rates and tax
Business rates for retailers and hospitality providers are to be reformed, cancelling the inflation-linked rise and providing an additional 50% discount for retailers, capped at £110,000. Business rates will also be reviewed every three years.
The move is aimed at helping physical retailers and hospitality companies as they continue to battle back after the lockdowns, but some warn that it doesn’t go nearly far enough.
Jace Tyrrell, Chief Executive of New West End Company, representing West End businesses said: “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 one-year 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. “
He added: “Reducing the time between revaluations to three years is welcome, as is the short-term relief for investment in improvements and sustainability, but this falls far short of a fundamental review. his simply doesn’t meet the Government’s manifesto commitment to reduce the burden of business rates on business. We hope that this is not the extent of the fundamental review.”
BRC’s Dickinson agrees: “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.”
She continues: “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.”
Dickinson adds: “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 chancellor also confirmed an extension to tax breaks for businesses. “Now is not the time to remove tax breaks on investment,” he told the Commons. “The £1m annual investment allowance will not end in December as planned it will be extended all the way to 2023. We will maintain a surcharge of three per cent and the overall rate for corporation tax on banks will increase from 27 to 28%,” Sunak confirmed.
Help for HGVs
After a rocky few months, logistics and delivery companies have finally had some positive news too. Sunak kicked off with an acknowledgement of the challenges facing the sector and the announcement of new measures that will aid freight transport companies and the many small retailers and manufacturers they serve.
He confirmed relaxations on temporary visas and also announced new lorry park facility plans, an extension of the HGV levy through to 2023 and the removal of vehicle excise duty on HGVs.
There are also to be a raft of shipping tax changes to encourage more international shipping companies to set up shop in the UK.
With fuel prices at the highest level in eight years, Sunak also scrapped the planned rise in fuel duty. That’s a saving over five years of £8bn. The average car driver will save £1,900.
“I can confirm the planned rise in fuel duty will be cancelled,” said Sunak. “Today’s freeze means the average tank of fuel will cost £15 less per car.”
BRC’s Dickinson comments: “Positive news for our nation’s HGV drivers. The BRC strongly supports the investment in lorry driver facilities around the UK, and we hope this makes lorry driving a more attractive career to those who may be considering it, as well as helping to retain those hardworking drivers already in post.”
David Jinks, ParcelHero’s Head of Consumer Research, adds: “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.”
However, he warns: “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.”
Jinks says: “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.”
Tech investment to boost ecommerce?
Sunak has also promised to turn the UK into a “science and technology superpower” by maintaining its target to increase research and development (R&D) investment to £22bn.
The Chancellor told MPs: “In order to get there, and deliver on our other priorities, we’ll reach the target in 2026-27 – spending, by the end of this Parliament, £20bn a year on R&D. That’s a cash increase of 50%.”
The government is set to inject some £30bn into its newly published net zero strategy, Sunak confirmed. The fresh capital will go towards “the new, green industries of the future”, the chancellor said.
Jinks says: “[This is] also good news for tech companies investing in areas such as ecommerce. They will likely benefit from the pledged £22bn research and development investment (R&D) and further funding for Innovate UK.”