The chancellor has unveiled the 2021 Budget, but what does it mean for independent retailers? Our retail insiders offer their verdict…
Martin Davenport, business rates partner at Hartnell Taylor Cook
“A mere three-month extension to the business rates holiday is hugely disappointing. I would have liked to have seen at least an additional six months! Sunak extending the furlough scheme until September is surely an indication that the economy won’t recover by June, so why hasn’t he done the same for business rates relief?
“Sunak’s speech also skirted around the swathes of businesses that will not benefit from the three-month extension. Offices, where occupation has been hugely restricted for nearly a year already, continue to be excluded from any form of rates relief. Additionally, medical use buildings continue to be left out. Also, given that some shops have been able to stay open, they may not be able to benefit from this 2/3 reduction after June. Finally, properties that have been empty don’t get any retail relief – why is this?
“How long can the chancellor turn a blind eye to the implications of business rates? He said this Budget focuses on getting people into quality jobs, but if he continues to ignore business rates, there won’t be any businesses left to offer jobs!
“Of course, this £6 billion tax cut and additional £5 billion grants package is welcomed. But it took too long. Sunak should have announced this in January when we entered the third national lockdown, giving businesses and landlords critical time to budget. Since then, many have gone under as they were unable to plan.
“This relief extension only tells a fraction of the story: the business rates system is crippling the high street. Four critical changes are required. The system must be more flexible and allow retailers to easily adjust rates to set up innovative mixed-use businesses – think in-store hair salons or champagne bars that will prove crucial in incentivising consumers to return. The current process – Check Challenge Appeal (CCA) – is time-consuming at best and impossible at worst. Secondly, the UK’s extortionately high Uniform Business Rates (UBR), which is currently 50p in every £1 and much higher than anywhere else in the world, must be brought down to about 30p. Thirdly, downward transition, which is crippling businesses in the North and the Midlands, must be abolished, so the system better reflects falling rents. Finally, empty rates relief, whereby landlords pay no rates when a property isn’t occupied, must be extended from three months to six months. Who is finding a new tenant in just 12 weeks at the moment?!
“If the government doesn’t haul the business rates system into the twenty first century, it risks undoing all the good work of its costly Covid support packages.”
Mark Heppell, partner at JMW Solicitors
“The freeze on Capital Gains Tax (CGT), and no mention of business disposal relief (Entrepreneurs’ Relief), is good news and business owners will breathe a sigh of relief (for now). The speculation surrounding CGT reforms was quite heavy leading up to the budget, and given the reviews that have been carried out in the last year, I would not be surprised to see changes in the near future so the message to business owners planning their exit will still be to bring forward their plans as it does feel like the days are number for the current regime.
“I’m also not surprised by the increase in Corporation Tax (from 2023) and it makes sense to me that the most profitable businesses will be called upon to contribute in a greater proportion. Hopefully the freezing of the rate below £50k profit and tapering to £250k profit will give some comfort to SMEs, but it will mean that, for most, there is more to pay.”
David Jinks MILT, head of consumer research at ParcelHero
|“It was all-too obvious that, despite the £65 billion the chancellor claims to be spending, there was not enough cash to splash to save many businesses. Today’s Budget was a start, but much more needs to be done now to save independent local retailers and small manufacturers struggling with the double jeopardy of Brexit and Covid. |
“Looking at the measures Sunak has introduced, there are undoubtedly some strong initiatives, such as the extension of the furlough scheme to September that could save thousands of jobs. On the other hand, there will be new employer contributions to the scheme. In addition, the rapid phasing-out of full business rates relief will be grim news for many retailers.
“The rise in corporation tax, from its current level of 19 per cent to a higher-than-expected 25 per cent from April 2023 will help plug the hole in the nation’s finances. However, is now really the time to start rebuilding the UK’s coffers at the expense of business? No matter how delayed, manufacturers and retailers are already struggling under the burden of Covid.
“The new rate won’t apply to businesses with profits of less than £50k and only businesses with profits of over £250,000 will pay the full tax. Nonetheless, the Government has, on the one hand, introduced measures to help businesses but, on the other hand, raised their tax burden. It’s simply robbing Peter to pay Paul. The increased corporation tax will also do nothing to encourage European companies looking to create UK arms to maintain a relationship with Britain post-Brexit.
“The extension of the “holiday” on business rates for retailers and other SME businesses until the end of June has been widely welcomed, though less generous discounted rates for the rest of the year are disappointing. The holiday also simply kicks into touch the real issue: Britain’s business rates are horrific. They are higher than in any nation in the EU. There needs to be a new solution, potentially one in which the property landlord, rather than the business occupying the premises, pays towards rates. Offsetting business rates with a threatened new 2 per cent tax on e-commerce sales will simply leave many retailers paying double taxes and will further endanger many of our favourite stores.
“The £5 billion restart scheme for High Street shops and hospitality firms in England is welcome news. It could be worth as much as £18,000 per firm, which will help many to reopen after lockdown. However, the impact of Covid means unpaid business debt will double to more than £8.6 billion this year, according to figures released today by The Insolvency Service. The new scheme won’t come anywhere near covering the true price of the pandemic on indie retailers. The news that non-essential retailers will only qualify for grants of up to £6,000 will also disappoint many business owners.
“The new Help to Grow scheme for small businesses is a good idea but may wither on the vine because of insufficient funding. Digital training for small businesses is an excellent concept. However, a reported budget of £520 million is a drop in the ocean compared to the sea of debt many fledgling businesses have accumulated during lockdown.
“Many jobs will be saved by the extension of the furlough scheme to the end of September, but the fear is that it is just postponing the inevitable for many more. Once the scheme ends, SME retailers and manufacturers will have to make the difficult choice about how many people they can retain while they fight to get back on track. It may simply push a new wave of redundancies back to later in the year. The news that businesses will have to contribute 10 per cent of employees’ salaries in July and 20 per cent in August and September is an unexpected extra cost.
“The Chancellor has nibbled around the edges of the huge tax burden facing businesses, large and small. The news that the reduced 5 per cent rate of VAT for the hospitality sector will now continue until September is, of course, welcome. The following interim rate of 12.5 per cent less so. Many manufacturers and retailers had hoped that Brexit would free the UK to set its own VAT rates and the chancellor would grab the chance to reduce VAT on many goods to encourage consumer spending.”
Christophe Pecoraro, managing director, PFS Europe
“Today’s budget announcements, which offers a support package of a business rates holiday, VAT relief and a £5 billion ‘restart’ grant scheme, will come as great news to brick-and-mortar retail – a sector that has been hard hit by the perils of lockdown. While providing some initial breathing space for high street brands, helping many to get back on their feet, a longer-term solution is needed in order to truly inject value back into the high street and compete in a digital-first retail era.
“It is becoming increasingly clear that the key to survival and growth will in fact be a hybrid approach, bridging the gap between the online and offline world. As such, omni-channel initiatives are being recognised as crucial investment options, with almost a quarter (24 per cent) of brands planning to invest in Buy Online Pick-up In-Store (BOPIS) capabilities ahead of this year’s peak season. Three-in-ten (30 per cent) are also planning to invest in curbside pick-up and 28 per cent in their ship from store capabilities.
“In a rapidly shifting climate, accelerated by the pandemic, retailers simply cannot afford to ignore the need to adapt and upgrade their current fulfilment offerings. Omni-channel investment and operational infrastructure will prove make or break for retailers in 2021. And it is becoming increasingly clear that a hybrid approach to retailing is needed to survive. To not only inject value back into brick-and-mortar retail but also keep up in a digital-first era.”