This week both major political parties have launched their manifestos. I should say at this point that all our analysis of what this means for our sector is here in our election centre so I would go over all the detail now.
The reason I’m writing about the manifesto launches is that I often get asked which party would be better or worse for the convenience sector. My reply is always that it’s up to members to take a balanced view of the full range of policies on their business, and it’s our job to analyse each policy’s impact on our sector. Both manifestos referenced a number of policies relevant to our sector, but I want to look at two: one which, on the face of it, is good for local shops (reduced business rates) and one which could be bad for local shops (an increased minimum wage). How do we weigh the impact of these policies on our sector?
The answer is that it depends on the exact model your business operates to. For the past couple of years we have been working with Said Business School at Oxford University to segment the sector in terms of stores’ cost base. You would expect small independent stores in prime locations to be net beneficiaries of this combination of policies because they would probably have relatively high rates bills, but may have very low staff costs. Larger stores in non-prime locations may already benefit from rate relief, but are likely to employ more staff, so they may lose out from a combination of a higher minimum wage and lower business rates. Independents not employing staff and with already low rates bills would probably not be affected by either policy, while stores with large numbers of staff and a high rates bill would gain on one hand and lose on the other.
Our research shows that averages are meaningless because of the stark differences in operating models between convenience stores. However, let’s take a “typical” store with 112 opening hours per week, 224 staff hours per week, and a £20,000 rateable value. By my calculations, a 20p differential in the minimum wage would be equivalent to about a 15% difference in rates bills.
There are two things I’d like to see our members do in the run up to 7 May. Firstly, do this analysis so that you have a clear idea of how all of the policy decisions that will impact upon your business. Secondly, while the politicians are on the campaign trail, we will be issuing our first cut of the Costs Barometer we have been working on with Said Business School. We would really appreciate your feedback because, as I hope I have illustrated, calculating business impact is complex, and the better we can be at doing this, the better the chance we have of influencing whoever forms the next Government.
