- By David Jinks, ParcelHero’s head of consumer research
Before the chancellor’s Autumn Statement, we were predicting Brits will spend £4 billion less on food, gifts and entertaining this Christmas than they did last year. The budget was probably not as gloomy as many people feared, but it was certainly no Christmas stocking packed with goodies. The new measures announced won’t restore confidence enough to encourage consumers to change their minds and splash out this Christmas.
Impact on consumers
‘The confirmation that the UK is now in recession and news that unemployment is set to rise from 3.6 million to 4.9 million by 2024 will worry many people. They will also be concerned about the burden of additional income taxes. The news that personal allowance and higher rate thresholds have been frozen certainly won’t encourage shoppers to open their wallets for Christmas. And big spenders will be concerned that the 45 per cent additional rate of income tax will be paid on all earnings over £125,140, instead of the current £150,000.
Finally, the announcement that average household energy bills will rise from £2,500 to £3,000 after April, as the government reduces its level of support, means everyone will continue to be wary about spending any more than they need to.
However, if chancellor Hunt could be accused of playing Scrooge, he has also shown the former miser in his redeemed state, following his visit by the three spirits of Christmas. His decision to retain the pension triple lock, increase benefits in line with inflation and increase the national living wage means that pensioners and the less well-off do have something to cheer. However, that is not enough to fuel any significant increase in seasonal spending.
Impact on industry
Retailers, manufacturers and their delivery and logistics partners have a lot to digest following the statement. Manufacturers may be heartened by the news that import tariffs are going to be reduced on some key component parts and that there will be a new initiative to make Britain “the next Silicon Valley”.
Retailers will also give a cautious welcome to news of the transitional relief scheme for business rates. The £13.6 billion business rates relief package will counter next April’s rise in the levy for thousands of companies. However, the ongoing business rates revaluation plans confirm that this outmoded and extremely costly tax will continue to strangle High Street businesses once any relief is withdrawn.
Transport and logistics companies will welcome news that the capital expenditure budgets are to be maintained, and that HS2, Northern Powerhouse Rail and East-West Rail remain on track. The construction of HS2 will enable existing rail lines to increase freight services and get unnecessary lorryloads off UK roads.
However, many logistics companies and couriers are committed to greening their fleets and reducing carbon emissions by introducing more electric vehicles to their fleets. It’s a shame that electric vehicles will no longer be exempt from vehicle excise duty from 2025. This means owners of electric vans will start to pay this tax and private motorists will be discouraged from making the same switch to electric power.
The chancellor was correct in saying that the lasting impact of covid on our supply chains has made goods more expensive and that our recession was largely made in Russia. However, he underestimates the impact of the previous chancellor’s now notorious mini-budget on small retailers. In saying he understands the motivation of his predecessor’s mini-budget in identifying growth as a priority, he whitewashes the costly harm it has done, dooming us to an Austerity Christmas.
It’s because of the previous mini-budget that retailers are unable to offer juicy discounts to tempt shoppers into spending more. Many traders were ordering their Christmas stock just as the notorious mini-budget prompted the pound to plummet against the dollar, the euro and the yen. Therefore, retailers paid significantly more for goods from the US, Europe and Japan than they did in 2021. Consequently, they now have less wiggle room for juicy Black Friday and Cyber Monday discounts to tempt shoppers. The damage has been done.
Compounded by the current strain on delivery services, we won’t be surprised if retailers economise by bringing forward their final order dates as Christmas approaches.