Industry, trade bodies’ lukewarm response to Sunak’s budget offerings

Chancellor of the Exchequer Rishi Sunak (C) stops at a sweets' stand at the Bury Market on October 28, 2021 in Bury, England. (Photo by Lindsey Parnaby-WPA Pool/Getty Images)

Shops, restaurants and bars and gyms in England which have been badly hit by the Covid-19 pandemic received a financial boost in the budget when chancellor Rishi Sunak on Wednesday (27) announced a temporary 50 per cent cut in their business rates, up to a maximum of £110,000.

In addition, he has scrapped 2022’s planned annual increase in rates for all firms for the second year in a row.

Business rates are charged on commercial premises such as shops, offices, pubs and warehouses, based on the value of the property. Business owners have complained for years that the system gives an unfair cost advantage to online retailers such as Amazon.

In his budget speech to parliament, Sunak added that green investments such as solar panels and heat pumps would be exempt from business rates.

Sunak’s budget has received a mixed response from the industry leaders and trade bodies. While ACS has welcomed Chancellor’s action to support businesses through green investment incentives, BRC does not seem to share the same sentiments.

Mixed Bag

Responding to the Chancellor’s Budget announcement, Helen Dickinson OBE, Chief Executive of BRC, said that though Chancellor spoke of a new age of optimism, “retailers will struggle to share his confidence after a Budget that does not do enough to reduce the burden of costs bearing down on our shops, our high streets and our communities”.

Helen Dickinson, Chief Executive of the British Retail Consortium

“This budget is a missed opportunity for retail and the three million people who work in the industry, and it prevents retail from maximising its contribution to the government’s levelling up agenda,” Dickinson said. 

Commenting on the announcement on business rates, Dickinson called it a “mixed bag” which falls far short of the truly fundamental reform that is needed and was promised in the government’s 2019 manifesto.

“While the government’s 50 per cent bridging relief for 2022-23 may prove to be beneficial for the smallest businesses, it will do little to support the businesses that pay two thirds of retail business rates and employ 1.5 million people. 

“With no reduction in the burden, this will lead to the unnecessary loss of shops and jobs and fails to incentivise investment in all parts of the country. This is bad news for every member of the public who wants a vibrant high street in their local community, with retail at its heart.”

British Independent Retail Association (BIRA) has also pointed out that the business rates “discount” announced by Sunak could actually cost indies more

“The rates bill for this year was reduced to 25 per cent (of normal levels) in response to Covid. Therefore reducing rates by 50 per cent next year is in fact a 100 per cent increase on what businesses are actually paying. On top of everything else, this will be a challenge,” Andrew Goodacre, Bira CEO, said, adding “more could have been done”, considering all the other inflation-busting increases such as wages, energy, supply chain, etc.

BIRA has also raised questions on business rates relief ‘cap’ of £110,000, seeking clarity on whether this is per property, or per business.

Drop in Ocean

Leading audit, tax and consulting firm RSM calls the reforms a “drop in the ocean”.

‘Business rate reform will be welcome news to small independents, but the £110,000 cap for larger retailers is a drop in the ocean and doesn’t go far enough to support a post-Covid recovery. The government looks to be trying to encourage retailers to invest by offering business rate improvement reliefs at a time when cash is low and the sector faces a barrage of challenges from wage increases, soaring energy prices and ongoing supply chain issues,” Jacqui Baker, RSM’s head of retail, said.

“Our recent research has shown that almost a quarter of retailers see business rates as the biggest barrier to growth so introducing a fairer business rates system is long overdue and waiting until 2023 to introduce more frequent revaluations is too long.”

Peter Sugden, real estate partner at Katten Muchin Rosenman LLP, commented on business rates that it is an extremely disappointing Budget for the commercial property sector.

“The pandemic has exacerbated the existing severe hardships already felt by the high street pre COVID and yet disappointingly there has still been no reform to business rates.  The industry has been lobbying the government for years, pre-pandemic, to help with these problems but has been completely ignored. 

Long Overdue

While many industry leaders seem not completely satisfied with Sunak’s offerings, insurance provider to small businesses Simply Business consider the budget as positive sign.

“It comes as no surprise that small retail, hospitality and leisure businesses have been disproportionately affected by Covid-19, losing a staggering £40,000 each on average due to the pandemic – almost double the £22,000 average losses reported by UK small business,” Alan Thomas, UK CEO at Simply Business, said.

“In addition to long overdue rate reforms, the announcement of a one-year 50 per cent discount on business rates – and a proposed total rate cut of £7 billion – is a positive sign that the government is committed to supporting small businesses in these industries to continue their recovery.”

Association of Accounting Technicians (AAT),  most of whose members either own their own small business or work for one, also welcomed Sunak’s budget.

“We welcome the Chancellor’s announcement today confirming that data and cloud computing costs will be included in qualifying expenditure for R&D Tax Relief – as called for by AAT in its response to the R&D Tax Reliefs consultation back in March this year,” Steven Drew, Head of Markets & Products, AAT, and spokesperson for Informi, said.

Commenting on the minimum wage increase, Drew added, “we appreciate that many businesses – especially smaller ones – are facing a variety of pressures, but it is important to recognise that hundreds of thousands of employees are under pressure, too. Finding a balance is key to ensuring everyone gets a fair day’s pay for a fair day’s work and the planned increases to the National Minimum wage help achieve this.”