Autumn Budget 2024: Retail
Wednesday October 23, 2024
Business rates decision key for retailers as we approach Autumn Budget
The retail sector has had to navigate some turbulent waters in recent years. The cost-of-living crisis has had a major impact on consumer spending habits that has only served to worsen fears about the ‘death of the high street’ post-Covid.
And while the easing of inflation and arrival of a new government earlier this year brought a sense of positivity, the long wait for the Budget and the gloomy communications around the state of public finances has since created a sense of uncertainty. It’s against this backdrop of uncertainty that consumer confidence has suffered a downturn as we head into the sector’s critical Golden Quarter.
Speculation around the Budget itself has done little to help, with tax increases – both business and personal – being the pre-eminent theme. Employers are reportedly set to pay more National Insurance which will add to retailers’ overheads while any taxes raised on individuals will only hit consumer confidence further.
Future clarity
But with the Budget also comes an opportunity for the retail industry to gain clarity over its future and see if a change in government translates to a change in approach towards the sector.
The most important thing that they’ll be looking out for is whether the government will reform the current business rates system – something that over 70 retailers including Tesco and Ikea have been lobbying the Chancellor for.
The retail sector has long argued that the current system is unfair and has caused it to pay a tax burden disproportionately higher than its overall economic output, curbing its investment and even forcing some retailers to shut their doors.
In more recent years, inflation has caused business rates to soar, and pressure from retailers on policymakers has increased to change the system and ease the burden they feel it has placed on our high streets. The British Retail Consortium (BRC) has been clear in what it wants – a 20% discount on business rates for all retailers to help ‘level the playing field’.
Labour’s manifesto did include a commitment to reform this rate and replace it with a fairer system, a move which was welcomed by those in the sector at the time. But this was before the Treasury identified a £22 billion hole in the public finances. With some reports suggesting the Chancellor is looking to find savings of closer to £40 billion, the manifesto pledge looks less and less like becoming a reality.

Away from business rates, there are other measures that retailers will be keen to see:
Planning reform
From the outset, the government has made it clear that it wants to completely reform the planning system in this country. This has been welcomed by retailers, who view it as an opportunity to accelerate the transformation and repurposing of high streets. The government’s National Planning Policy Framework consultation is due to close prior to the Budget and, while it is more legislative in nature, retailers will be keeping an eye out to see if any headline outcomes are revealed.
Tax free shopping
There are those that also want a restoration of tax-free shopping for international visitors. In January 2021 the government ended tax-free sales of goods in airports, ports and Eurostar stations.
With the number of international visitors now increasing again following a decline during the pandemic, there are those that view this as an opportunity to encourage more consumer spending and raise additional revenue by restoring the UK’s tax-free shopping scheme.
Charity VAT relief
With many retailers donating their products to charities for onward sale, there is the hope that the VAT relief they currently benefit from for this will continue, allowing for a significant uptick in donations from retailers and helping those most in need have access to vital products.
It’s clear that there is a lot for retailers to be keeping they’re eye out for when Rachel Reeves takes to the dispatch box at the end of the month, the most important of which will be the announcement on what the government will be doing around business rates.
But regardless of what is announced, and whether retailers’ expectations will be met, the Budget will at least set the playing field for the next parliament. Once retailers know what is coming down the line, they will be in a better position to map out a robust plan to face both the opportunities and challenges that lie ahead.
Employers are reportedly set to pay more National Insurance which will add to retailers’ overheadsTony Wright Restructuring Advisory
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