What the Autumn Budget means for the Retail sector
Following the Chancellor’s Autumn Budget announcement earlier this week, some new policies have been welcomed by the retail sector and specifically those smaller businesses which have had a challenging time on Britain’s high streets.
Disposable incomes will be boosted by the decision to raise the Personal Allowance to £12,500 and the Higher Rate Threshold to £50,000 from April 2019. This should increase the overall amount customers have to spend in the convenience sector.
Phillip Hammond’s reiteration of support for home grown enterprises, entrepreneurs and independents resulted in several funding boosts, such as increasing contributions to the Business Development Fund to £1million and other initiatives to help reduce costs, which will no doubt benefit small operations. However large business was given little, despite facing the same cost pressures as their smaller counterparts. The Chancellor made a surprising move by looking to introduce a UK Digital Services Tax. This would apply to global tech giants who generate over £500 million in revenue in Britain by April 2020 and go some way to levelling the playing field on the high street for physical and online retailers. However, this may not have gone far enough for some retailers who have been calling for a transaction tax.
Saving the high street seemed to be high on the agenda following recent closures and the highly publicised struggle of some well known large and small retailers. £675 million was announced to be co-funded for the Future High Street Fund, meaning local councils will receive backing to focus on improving, redeveloping and modernising high streets, with a particular focus on new housing and increasing footfall to local hubs again.
One of the most significant concessions from the Chancellor came in the form of a business rates overhaul. All retail businesses in England with a rateable value of £51,000 or less will have their business rates cut by a third for the next two years. Business rates have been repeatedly identified as one of the key cost pressures facing retailers so this will be welcomed by those who typically are the least able to shoulder the cost. Furthermore, the apprentice levy contribution for small businesses is to be cut from 10% to 5%, aiming to ease this pressure on workforce costs and encourage employment.
The Chancellor’s resolve to keep wages rising means the National Living Wage rate will increase to £8.21 for 2019/20. Whilst positive news for staff in retail and service positions, we could see employers struggle to maintain staff numbers as a result. Rent and other operational costs for ‘bricks and mortar retailers’ were not addressed, however, some other measures that could impact the supply chain were noted. These include a new tax on the manufacture and import of plastic packaging which contains less than 30% recycled plastic and a freeze on fuel duty for the next year. The latter being welcomed by drivers and petrol retailers alike.
Overall, there are many positives to take away from this year’s Autumn Budget. However, some big household retail giants such as House of Fraser and Debenhams continue facing severe challenges – but it seems that big business will have to continue to solve its own problems. For smaller businesses, it is hoped that a material impact will be felt, easing cost pressures and preventing more closures. Encouragingly, growth in the independent sector and high street appears to have been supported by this year’s Budget.