Businesses and individuals have been responding to the Autumn Budget announcement on Wednesday; on the whole it doesn’t appear to be a pretty picture for independent high street retailers…
Rachel Reeves delivered her first Budget as Chancellor, and the first Labour Budget in 14 years. She increased taxes by a record £40bn and increased borrowing to £127bn for this tax year. Alongside the headline changes to minimum wage, fuel duty and increased spending for public services, there were several changes that affect small businesses as well as individual consumers.
It’s a tough Budget for businesses, given the increase in National Insurance Contributions and other employer cost base increases. These increase the burden on business, limit the private sector’s ability to invest, ultimately make hiring more expensive, and restrict the capacity to offer pay rises.
National Insurance contributions by employers will increase, up from 13.8 to 15 per cent. However, the threshold at which businesses start paying NI on a worker’s earnings drop from £9,100 to £5,000.
Business rates will increase again next year
On the other side, increase to the National Living Wage were confirmed for the next tax-year, which will benefit more than three million workers. The increase is an inflation-busting 6.7 per cent, worth £1,400 a year for a full-time worker, and Labour plans to work on closing the gap with 18- to 20-year-olds, seeing their largest increase on record, worth £2,500 a year.
Elsewhere, the Chancellor also committed to investing £40m to begin much-needed reform of the Apprenticeship Levy into a more flexible Growth & Skills Levy. This will be welcomed from businesses across the economy who have expressed frustration with how the Levy has impacted their ability to invest in a broader range of training solutions.
Jeff Moody, Commercial Director at Bira, the British Independent Retailers Association, aired his views on the subject, simply saying: “Worst Budget for the high street in my 35 years working in retail.”
He added: “The government’s actions today show complete disregard for the thousands of hard-working shop owners who form the backbone of our high streets. Small retailers, who have already endured years of challenging trading conditions, now face a perfect storm of crippling cost increases; their business rates will more than double as relief drops from 75 to 40 per cent, while they’re hit simultaneously with employer National Insurance increases.”
Jeff Moody speaking at the recent Bira Conference
Mr Moody said that for all the government’s rhetoric about supporting small businesses and revitalising high streets, its actions “do precisely the opposite”, forcing many shop owners to make “heart-breaking decisions” about their business’s future.
Meanwhile, Mark Wright, Director of Merseyside-based independent electrical retailer, Smiths TV, focused on the government’s changes to Inheritance Tax…
“I am the fifth generation working in our family business,” he explained, “and for us to shoulder a tax burden of potentially hundreds of thousands of pounds on an Inheritance Tax bill would have severe implications to the running of the business – and potentially even the viability.”
Mr Wright said he empathised with the thousands of family businesses that this Budget will impact, and said he is worried about the “severe” consequences over the long term for the economy.
“It seems counterintuitive that a healthy business could be struck a tax blow that could cripple it because of a sudden family death,” he went on. “Surely as the backbone of the economy, the government should want to nurture these long-running, established family companies that provide employment, pay taxes, rates etc.”
Other retailers sharing their thoughts include Stephen Craggs, of electrical retailer, G Craggs Ltd, who said: “Business owners have had the last drop of entrepreneurial spirit squeezed out of them and will close their doors.”
Another anonymous retailer added: “The High Street is already depleted and this will add to the death of it.”
What are your thoughts on the recent Budget announcement? Get in touch with the Editor: jackcheeseman@ertonline.co.uk.
