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BUDGET 2021 What has the chancellor done for retail and the recovery?

Sunak: has he done enough to save retail?

Today’s budget has much in it to help retail get back on its feet post-lockdown 3.0. InternetRetailing assess the key elements that will impact our sector and offers some expert commentary.

Retail restart grants, business rates and corporation tax

The retail, hospitality and leisure sector is receiving a £5bn restart grant, as well as a continuing business rate holiday that should give the non-essential retail sector a £6bn boost.

The business rate holiday and furlough schemes will continue into June and September respectively, helping the physical sector to come back to life after the latest lockdown. Also confirmed in the Budget was a “new restart grant”  that would be provided in April to help businesses reopen as the phased lockdown exit plan ramps up in mid-April.

However, corporation tax is taking an upward hike in 2023, with firms making more than £250,000 in profits being put into a new higher 25% corporation tax bracket.

Helen Dickinson, Chief Executive of the British Retail Consortium, comments: “Restart grants provide a vital injection of funding during this extremely challenging period. No businesses have remained untouched by the pandemic and we welcome this cash to help ‘non-essential’ retailers improve safety measures, build up stocks, and prepare for reopening. However, the Chancellor gave no clarity on EU state aid rules – if these continue to apply to grants for closed businesses, then many larger companies, employing hundreds of thousands of people, will miss out on millions of pounds of vital support. We need an immediate amendment to the state aid system which is stopping impacted companies from accessing the grants which were announced today, and earlier this year.”

However, the retail industry has changed over the past year and, while welcome, the restart scheme may miss the need for catering to changed shopping habits. Andrew Lawson, SVP EMEA, Zendesk warns: “The ‘Restart Grants’ spell a positive move in the right direction for UK businesses as we prepare for reopening in the coming months. At the same time, it must be noted that there has been a fundamental shift in shopper habits over the last year, and one that we expect is here to stay. According to our 2021 Customer Experience Trends Report, which looked at data from more than 90,000 companies across 175 countries on the Zendesk platform, nearly a third of customers in the UK (29%) began buying from new companies during the pandemic and close to half (45%) reported using new service channels.”

He continues: “The figures speak for themselves – we’re no longer gradually shifting to online, we’re evolving dramatically. And this evolution is here to stay. 61% of UK customers surveyed said they plan to keep using these new channels for support. To keep pace, businesses must now ensure they’re putting the right resources in place to meet these changing customer needs.”

This is echoed by Paul Morris, Practice Lead, Retail Sector, EMEA, Juniper Networks: “It is important to remember that consumer habits have changed forever. The future of retail is hybrid. The last 12 months has been a difficult time for most retailers with physical stores being closed, often at short notice, and a reticence for consumers to go into the stores that are open. Most ‘hybrid’ retailers have seen a large shift in their business from in-store to on-line, and customer preferences have similarly shifted, shining a light on the highly personalised experience on-line shopping can give.”

On business rates, the BRC’s Dickinson says: ““The Chancellor has taken steps to avoid the business rates cliff edge on 1 April, and the three-month extension will provide essential funding at this challenging time. Beyond this point, relief is capped at only £2m for closed businesses, a tiny fraction of their total liability. Without further funding, it is likely that many ‘non-essential’ retailers will struggle under sluggish consumer demand and high Covid costs. The business rates system remains broken; it is vital that the ongoing business rates review delivers on its promise to reduce the burden on retail which already results in store closures and job losses.”

Investment in digital

While some were expecting the chancellor to announce an online sales tax which never came, there is a pressing need to invest in people and technology to drive retail in this new world order – however, some feel that not enough has been done to recognise the changed retail landscape.

The BRC’s Dickinson says: “The UK retail industry is a global leader in digital innovation and online retail has provided a vital lifeline for many households across the country over the course of this pandemic. Support for businesses to improve digital skills and develop their online offering will boost an already dynamic sector.”

She adds: “The ’super-deduction’ must include investment in new technology. The UK retail industry’s investment in digital innovation, which is already world-beating, could be further boosted if this is tailored appropriately. This in turn will create more high value jobs and added value for UK plc.”

Christophe Pecoraro, Managing Director at PFS Europe agrees: “It is becoming increasingly clear that the key to survival and growth will in fact be a hybrid approach, bridging the gap between the online and offline world. As such, omnichannel initiatives are being recognised as crucial investment options, with almost a quarter (24%) of brands planning to invest in Buy Online Pick-up In-Store (BOPIS) capabilities ahead of this year’s peak season. Three-in-ten (30%) are also planning to invest in curbside pick-up and 28% in their ship from store capabilities.”

He adds: “In a rapidly shifting climate, accelerated by the pandemic, retailers simply cannot afford to ignore the need to adapt and upgrade their current fulfilment offerings. Omnichannel investment and operational infrastructure will prove make or break for retailers in 2021. And it is becoming increasingly clear that a hybrid approach to retailing is needed to survive. To not only inject value back into brick-and-mortar retail but also keep up in a digital-first era.”

However, Mike Rhodes, CEO of Consult My App, feels that digital has been overlooked – and that that is a costly mistake. He says:  “Whilst today’s statement pays lip-service to a number of sectors, ultimately the government’s latest policies will fail to prepare British industries for the difficult future ahead. Grants to help retailers bounce back and revive the high-street for instance, may go a short-way in securing and protecting jobs, but the money would have been better invested into their digitalisation. High-street retailers need to be given grants that will allow them to digitise, build websites, market apps and ultimately appeal towards the now fully digital consumer.”

He continues: “By failing to help retail, hospitality and construction industries to digitise and evolve for the future, we’re holding them back from galvanizing on the opportunities that many other industries, such as Gaming, FinTechs and Leisure businesses are reaping the benefits from.  With that said, this government’s investment in Britain’s young workers and traineeship schemes is greatly encouraging. As a CEO in a booming-tech industry, the prospect of bringing on eager young talent is something we’re greatly looking forward to.” 

Sunak did announce a digital training for small businesses, which is an excellent concept, however, its reported budget of £520 million is a drop in the ocean compared to the sea of debt many fledgling businesses have accumulated during lockdown.

On apprenticeships Dickson agrees: “The additional incentive to take on new apprentices is welcome, but what is most important to the success of such training and the upskilling of our future workforce would be greater flexibility in how firms are able to spend their Apprenticeship Levy funds.”

Contactless limit raised to £100

An unexpected Brexit bonus is that the government can raise the limit on contactless payments, seeing it rise from £45 to £100 – the second such increase in a year.

Sunak said: “As we begin to open the UK economy and people return to the high street, the contactless limit increase will make it easier than ever before for people to pay for their shopping, providing a welcome boost to retail that will protect jobs and drive growth.”

In response, Ian Bradbury, CTO, Financial Services at Fujitsu UK&I says: “With the ongoing pandemic warranting a socially distanced society, it’s unsurprising to hear that the contactless limit is set to rise to £100 for major retailers. At the beginning of the pandemic, businesses had to encourage digital card payments as cash was a carrier for infectious diseases, while some refused to accept cash altogether. And these spending habits will likely continue beyond the rollout of the vaccine with a recent study finding that one in five made a contactless payment for the first time since the pandemic.”

He adds: “More importantly, the move to contactless shouldn’t come at the expense of wider society. There is a lot to admire about the prospect of a 100% cashless society including increased security, accessibility and convenience day-to-day. However, the reality is that we have a long way to go and there are still large proportions of society who rely on cash; recent research found that nearly 2.2 million people in the UK use cash for all of their daily transactions. While this figure may change post-Covid-19, what’s clear is that before the pandemic there was a significant number of people who relied on ATMs, traditional building societies and cash. And if we are to continue to move into the future of payments, providing access to both cash and contactless solutions, as well as nurturing a society of digital solutions will have to remain a priority.”

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