Chancellor Philip Hammond (pictured) has upgraded forecasts for growth in his Spring Statement and predicted falling inflation, debt and borrowing.
Speaking in the House of Commons today (March 13), he claimed the UK economy had reached a turning point and revealed a forecast of 1.4 per cent growth this year – 0.1 per cent higher than the forecast from the Office for Budget Responsibility in November.
The outlook for 2019 and 2020 remained unchanged at 1.3 per cent.
Despite this upwards revision, Helen Dickinson, chief executive of the British Retail Consortium (BRC) claimed that the economic picture remained “fairly bleak”, with Office for Budget Responsibility (OBR) expecting private consumption to make a lower contribution to growth this year.
“That will only add to the challenges of the current trading environment,” she explained. “The [retail] industry is undergoing rapid structural change as technology revolutionises the way we shop and operating costs escalate, at the same time as inflation continues to outpace wage growth – eating into consumers’ spending power and keeping overall sales growth low.
“The cumulative effect of these prevailing retail headwinds has unfortunately been highlighted by the recent casualties on the high street, which should refocus attention to what is going on in retail in the UK at present.”
The Chancellor also revealed that the next revaluation for business rates would be brought forward to 2021, with revaluations occurring every three years after this.
Patrick O’Brien, retail research director at GlobalData, a leading data and analytics company, commented: “Philip Hammond trailed his Spring Statement as an event-free speech and he did not disappoint. While the upbeat signals beforehand hinted that the OBR would be backtracking from the savage downward revisions to the economic forecasts it made in November last year, instead it made only a 0.1 per cent increase to GDP in 2018, which was outweighed by decreasing forecasts 0.1 per cent in both 2020 and 2021.
“The data does point to a slightly better near-term picture for retailers though, with falling inflation leading to an increase of 1.2 per cent in real household disposable income in 2018.
“On the perennial problem of business rates, though, the only help was the bringing forward of the next revaluation to 2021, which will be little help to struggling retailers about to be hit by increased rate bills next month.”
Ms Dickinson added: “We’ve consistently called for more frequent revaluations and welcome the Chancellor’s decision to move forward the next revaluation by a year to 2021 as a step in the right direction. More frequent revaluations are no easy task and require strong collaboration and exchange of information jointly between the Valuation Office and ratepayers.”
Mr Hammond also put forward a series of consultations on future policies, which included a new VAT collection mechanism for online sales to ensure that the VAT that consumers pay “actually reaches the treasury”, as well as how online platforms can help users to pay the right amount of tax and the future of cash and digital payments.
Ms Dickinson commented: “The Government needs to look more widely than simply focusing on digital tax, instead looking across all elements of business taxation. Given the fundamental questions we now face in a digitally connected and globalised world, where tax systems have evolved on a national basis, the Government needs to go further than the current business tax road map, published in March 2016. Specifically, there is a need to rebalance away from input taxes (on things like people and property) and towards output taxes (on profits), as well address other underlying problems with the way the different taxes work. This would attract investment, which would lead to greater productivity and improved living standards.”
The Chancellor also suggested measures to end late payments to firms, as well as plans to make the least productive businesses learn from the most productive.
Federation of Small Businesses (FSB) national chairman Mike Cherry said: “The Chancellor has sent a clear message to UK boardrooms by committing to ending the late payment crisis that destroys 50,000 businesses a year. We look forward to working with the Chancellor and his team to eliminate the scourge of late payments. Ending the late payment crisis could add £2.5 billion to our economy annually and help close the productivity gap.
“Eight in 10 small firms suffer from late payments. The collapse of Carillion highlighted the dangers of the UK’s pernicious poor payment culture. We need to create an environment where another Carillion can’t happen.”