UK Autumn Statement: tepid reception for low-level giveaway

By

Sandra Halliday

Published
Nov 22, 2023

The UK government has set out a number of financial changes in its Autumn Statement with the Chancellor, announcing something of a giveaway ahead of what’s expected to be a general election next year.

But what does this mean for the retail and business community, as well as for their customers (the end consumer) and are all the new measures being warmly welcomed? 

There are cuts of a few percent to National Insurance for both employed and self-employed people, but the Office for Budget Responsibility has issued a forecast showing that taxes are still heading upwards. That’s because the levels at which people start paying tax altogether, or start paying higher rates, remain fixed even though salaries are increasing. It means someone who's had a wage rise that may not have kept up with inflation will now have to pay more tax on that higher salary.

The OBR also warned that living standards based on real household disposable income per person could be 3.5% lower in 2024/25 than pre-pandemic. That's the biggest drop in living standard since such things were first recorded in the 1950s.

On the plus side, consumers should have more money in their pockets when looked at from some angles. The State Pension, for instance, will rise by 8.5% in April, even though inflation is now running well below that level, and Universal Credit and other benefits will rise by 6.7%.

The National living wage is also rising by almost 10% to £11.44 an hour.

And the Chancellor has also officially levelled the playing field across period products so that, from January 2024, period pants will be VAT-free, which was welcomed by retailers who have been campaigning for the change this year.

Business rates: giving and taking away

Business rates have been frozen for small businesses for a year and there's a 75% discount up to £110,000  for retail.

But in general, the business rate measures got a fairly unenthusiastic reception.

There’s some frustration that the relief on offer is not as much as had been hoped for and isn't being applied evenly across the retail sector.

David Parker, Head of Rating at Savills, said of this: “The renewal of the retail, leisure and hospitality relief, which will benefit some shops, is welcome news. The relief has become a necessity since Covid struck, and continues to be required as we collectively face the cost pressures that energy, the cost of borrowing and inflation have brought with them.  

“The disappointing aspect is the continued cap on the benefit at £110,000 per business as most medium to large businesses will see relatively little benefit from the relief. The financial pressures faced in the retail sector are not unique to small operators. 

And property services giant Colliers called it the “final nail in the coffin” for the high street.

John Webber, its Head of Business Rates, said the way business rates are being calculated means the Chancellor “has grabbed even more cash from hard-pressed retailers. For these businesses, the multiplier will be 0.546 – meaning business rates is heading towards being a 60% tax!

“The Chancellor’s actions will be a massive hit to the high street. Although most businesses in the retail and hospitality sectors have benefited to some extent from the 2023 Revaluation, the sectors are still under pressure facing higher occupational costs across the board as energy, employment and insurance costs soar- yesterday’s rise in the national living wage only adds to the pressure.

“In his rush to save his job, the Chancellor has ignored the calls of the BRC and seems to have forgotten that the larger retailer companies are the main employers in their sectors. Hitting them with a 6.62% rise in their rates bills next April will have a dire impact and certainly dampen expansion and growth plans.”

Rates bills estimates

Colliers estimated, for instance, that Zara’s rates bills will rise from £15.29 million this year to £16.3 million next, while Next will see a rise from £97.3 million to £103.6 million and H&M will rise from £33.5 million to £35.7 million. In Oxford Street, Selfridges’ rates bill “will increase by over £0.55 million to an eye watering £9.503 million per annum”. 

Meanwhile, Scottish Retail Consortium director David Lonsdale was also negative on the business rates issue.

He said: “The Chancellor has flubbed the chance to freeze the business rate. This short-sighted decision means the medium-sized and larger retailers across the UK who underpin the vitality of our town and city centres and employ the vast majority of retail workers are now staring down the barrel of a hefty £540 million hike in their business rates bills from next spring. A hike of this magnitude will put upward pressure on shop prices and undermine efforts to rejuvenate high streets and retail destinations.”

“This misstep is the antithesis of the Prime Minister’s anti-inflation strategy and recently unveiled long-term plan for towns. Hopefully, the Scottish Government’s Finance Secretary will take a more enlightened approach and go further and freeze the business rate or at least blunt any uplift in next month’s Scottish Budget.”