As the dust settles on the much-anticipated Spring Budget of 2024, retailers across the UK have been left with a lingering feeling of disappointment following the announcement. Hopes were high for policies and initiatives that would invigorate the struggling retail sector, following calls by the industry to reassess rising business rates, halt the tourist tax and revisit the outdated Apprenticeship levy. Many are feeling let down that these vital issues were not addressed by the chancellor and are preparing for a difficult 2024.
In this blog, we delve into some of the announcements (or lack thereof) from the Spring Budget, deemed by Curry’s chief executive, Alex Baldock as “bitterly disappointing”,[1] and the implications for retailers across the nation in search of stability and support for the industry.
Business Rates
During the run up to the Spring Budget, retailers lobbied and called for the government to reconsider the current business rates model and put in place delays to planned business rates increases, allowing them to invest more into growing their business and the retail economy as a whole. The hope was for the government to switch from using September 2023 CPI to the April 2024 projected CPI, saving retailers a total of £1.92 billion.[2] However, nothing was specifically mentioned in the budget statement, so retailers are steeling themselves for increased business rates and building these into their forecasts for 2024.
In November 2022, the standard multiplier for higher value properties was frozen at 51.2p, but in the Autumn 2023 Budget statement, it was revealed it would increase in line with the current rate of inflation which was 6.7%. According to commercial real estate intelligence firm, Altus Group, the rise will impact 43,130 retail properties with a rateable value of over £51,000 in England – the cumulative total of business rates will rise from £4.61 billion in 2023/24 to £4.92 billion in 2024/25.[3]
In a LinkedIn post ahead of the budget announcement, M&S chief executive Stuart Machin wrote that to ignore the calls for a Business Rates rethink to be “economically illiterate.”[4] Others throughout the industry have agreed, particularly in light of the fact that the chancellor, Jeremy Hunt, confirmed last Wednesday that inflation is forecast to fall below 2% in the coming months. British Retail Consortium chief executive Helen Dickinson was outraged saying “How can a whopping 6.7% tax rise in April be justified, when the chancellor himself is saying inflation is forecast to be nearer 2%?”[5]
Although, the Autumn Statement of 2023 confirmed that a Business Rates discount of 75% for qualifying retailers would continue into the 2024/25 tax year, with the percentage hike in Business Rates what it is, smaller retailers are still likely to struggle with higher costs. Charlotte Broadbent, UK general manager at Faire, the online wholesale marketplace, stated, “woolly references to a generic “business rates support package” have left [retailers] feeling confused and unclear and what support is available and how it could tangibly aid their growth.”[6]
VAT Free Shopping
Calls by retailers to reinstate VAT-free shopping for tourists were similarly ignored by Hunt. Alongside Wednesday’s Budget, the Office for Budget Responsibility’s economic and fiscal outlook report declared the reintroduction VAT-free shopping for international visitors to be “unlikely” to have a significant impact on the “productive capacity of the economy.”[7]
This has been dubbed as a “huge own goal” by experts across the industry. Charlotte Broadbent stated, “The failure to address VAT-free shopping seems incredibly short-sighted. It has historically been a huge growth driver for the retail economy, encouraging consumers to spend more on big ticket items. With both the Olympics and the Euros on the horizon, the chance to stimulate high street spending was an open goal, and now goes down as an opportunity squandered.”[8]
As a result of this decision, the Association of International Retail estimates that UK retailers will lose £1.5 billion per year to tax-free EU competitors.[9]
Empty Property Relief
The Budget also provided the information that the period for which an occupier must occupy a property to gain empty rates would extend from 6 weeks to 13 weeks. This move will likely “discourage short-term letting of empty properties and will bring down the curtain on pop-up shops,”[10] according to Vivienne King, chair of the Shopkeeper’s Campaign, ultimately resulting in less properties occupied and bringing in less revenue from business rates.
John Webber, head of business rates at Colliers also added, “This is a kick in the teeth for those retail or leisure landlords who are unable to find a tenant for their property, who will end up paying considerably more in business rates for a property from which they are receiving no income. This is likely to deter property investment and values in an already distressed market.”[11]
It’s not all doom and gloom for the sector, with the reduction of Class 1 National Insurance rates to 8%, down from the cut to 10% in January. This reduction will put an extra £900 in the pocket of the average worker on £35,400 per year[12], allowing the public to have more disposable income which could provide a small boost to our high streets.
The fall in Inflation to below 2% in the coming months is also welcome news, the hope being that this may provide some relief to smaller business struggling with rising costs in recent years. Another positive to small businesses is the news that the VAT threshold will raise from £85,000 to £90,000 in the new tax year.
While hopes were high for substantial support from the government to revitalise the retail sector, the Spring Budget of 2024 seems to have fallen short of retailers' expectations and serves as a sobering reminder of the challenges facing the industry.
Dickinson firmly believes that the retail sector, which employs 3 million people across the UK, is making strides towards a more positive future, but she states, “it seems the chancellor does not share in our ambition and today’s Budget will do nothing to deliver a better future for retailers and their customers.”[13] The British Retail Consortium have again called for the government to “fix the problem with business rates” as they had set out to do in their election manifesto – let’s hope they listen up as a lack of action is likely to cost the retail industry £470 million extra every year.
Despite the disappointment in last week’s announcements, retailers will regroup, adapt, and explore alternative strategies to grow and sustain the industry. The retail industry is nothing if it’s not resilient – as we move forward, though the road ahead may be challenging, we have no doubt that retailers will channel this disappointment into fuel for positive change and chart a course towards a brighter, more prosperous future for the retail sector.
[3] https://www.drapersonline.com/news/government-scores-own-goal-as-spring-budget-ignores-fashion-retail
[4] https://www.linkedin.com/pulse/spring-budget-2024-3-things-id-like-chancellor-announce-stuart-machin-qmhfe/
[5] https://www.drapersonline.com/news/government-scores-own-goal-as-spring-budget-ignores-fashion-retail
[7] https://www.drapersonline.com/news/government-scores-own-goal-as-spring-budget-ignores-fashion-retail
[9] https://www.drapersonline.com/news/government-scores-own-goal-as-spring-budget-ignores-fashion-retail
[10] https://www.drapersonline.com/news/government-scores-own-goal-as-spring-budget-ignores-fashion-retail
[11]https://www.drapersonline.com/news/government-scores-own-goal-as-spring-budget-ignores-fashion-retail