We have had a run of major announcements affecting retail from George Osbourne in his Budgets and Autumn Financial Statements, so by his standards yesterday was a low key affair. The compelling statistics were there: the economy is back in growth (2.4%) and the amount of people unemployed has fallen again by 63,000 .
The debate is about whether consumers feel like things are getting better. I shudder when politicians battle over who knows better what people feel, but our own evidence from our Voice of Local Shops survey suggests that independent retailers are increasingly optimistic.
We all know that a quarter of local shop owners plan to invest in their business over the next twelve months and the Chancellor is making clear his desire that retailers are able to do this. The doubling of the Annual Investment Allowance is probably not that important to our sector; even ambitious c-store refits tend to come under the existing threshold of £250,000, never mind the new limit of £500,000. In fact, the big decisions for local shops have already been announced, and will come into force on 6th April this year – the £2000 discount in national insurance for all employers and the £1000 discount in business rates bills for all stores under £50,000 rateable value. These are real savings that will make it that little bit easier to invest.
Of course it’s not all good news, and the decision to increase the minimum wage by 3%, confirmed again yesterday, will put pressure on retailers costs. There is an argument that the 3% increase was not a bad outcome given the speculation and debate about even larger increases. This may be true, but the cost impacts on local shops are undeniable. If retailers don’t go ahead and invest in their business, it will be because of the pressure on their wage bills.
The other headline from the Budget was the generous action to reduce beer, freeze duty on spirits and scrap the planned 2% increase above inflation across the Board. The main reason we welcome this decision is that it significantly reduces the incentive for duty fraud.. As it stands the Exchequer loses £1.2bn in revenue from non-UK duty paid alcohol finding its way into the supply chain. Government is working on new ways to tackle this (such as a new registration scheme for alcohol wholesalers, also referenced in yesterday’s statement), but to steal a phrase often heard in recent budget debates, they need to go further and faster. We also need to see the illicit trade in tobacco tackled, and yesterday’s duty increase is another win for the criminal gangs at the heart of this trade who will also be hoping for the introduction of standardised tobacco packaging to further boost their profits.
This was an interim Budget, stuck between the big announcements on business rates and national insurance and before the next two statements that will be dominated by the politics of the 2015 general election. Retail may not have been at the heart of this Budget, but it still matters to local shops.
