Retailers welcome the government’s focus on growth, but are grappling with rising costs. Ahead of the Spring Forecast, we outline key measures to reduce tax burdens, stimulate investment, and enhance consumer spending.
The Chancellor’s recently outlined a vision for faster growth fuelled by increased investment. Retailers support the government’s emphasis on growth, especially its call for faster planning decisions and the establishment of Skills England to enhance skills and training. However, retail investment is being burdened by £7bn in new costs this year, stemming from higher employer NICs, an increased National Living Wage, and the new packaging levy. These additional expenses are hindering new investments in stores and jobs, and pushing retailers to raise prices.
Reducing the tax burden
The burden of business rates is an issue that frequently comes up frequently, and is something that’s already featured on the ‘wishlist’ of the British Independent Retailers Association as priority area for the Chancellor to address. While some support measures were announced at the Autumn Statement in November 2023 – including an extension to the Retail, Hospitality and Leisure Relief (RHL) for 2024/25 and a freeze to the small business multiplier for businesses in England – many larger companies are likely to see a rise in their rate bill when this starts from April, further adjustments to this are unlikely due to the cost involved in implementing any further cuts or changes.
Wider reform of business rates, which some in the sector believe are an advantage to online retailers at the expense of those with physical property portfolios is also probably not going to feature. The government is looking at the system, but any proposals will need to be given careful consideration, and review is likely to take time.
Retailers and other labour intensive industries have been raising their concerns in relation to the increases in employers NIC and minimum wage rates from April 2025, a reduction or other support in either of these areas would be welcomed by retailers, however the chancellor has already stated that this is unlikely to happen.
Increasing demand for retailers
Some retailers and other industries such as hospitality and leisure have been requesting the return of VAT free shopping for retailers, as since its abolition in 2020, as this has cost the economy an estimated £10.7m in lost GDP annually. Reinstatement would give a much needed boost to retailers, however with the cost to the treasury estimated at £2bn per year in tax revenue, this may be unlikely to be reintroduced at the current time.
Another area under consideration is that of further cuts in the levels of employee National Insurance contributions. This would not directly give support to retailers, but would help by putting extra money back into consumers pockets and help drive ability to spend more at the tills.
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