Industry chief warns fresh tax grab will push ‘loved’ retailers to the wall
More of Britain’s “well-loved” retailers will go to the wall if the government unleashes another round of tax hikes on businesses in the Autumn, the boss of the British Retail Consortium (BRC) has warned, as fresh data from the body found that nearly nine in 10 high street bosses are struggling with the tax burden.
Helen Dickinson said that the price rises, job cuts and investment reductions that retailers have had to carry out in response to last year’s Budget would “accelerate [and be] worse” if the Treasury opted to raid the sector again at October’s fiscal event.
“What we saw last year was a step change in the cost base,” she told Morning Wire. “If there is another step change in the cost base, impacts we’ve already started to see over the last six to nine months would only accelerate.”
Retail is among the worst affected sectors from the Chancellor’s decision to mount an unprecedented tax raid on the private sector at last year’s Autumn Budget. Along with the hospitality industry, retailers were especially exposed to the £25bn hike to employer national insurance contributions, because of their reliance on large quantities of relatively low-paid and part-time staff.
Parallel to the NICs rise, retailers also shouldered an above-inflation hike to the minimum wage, which the BRC has estimated will cost its members over £2.7bn annually in higher wage bills. It chalked up the overall damage to the sector from the Budget at £7bn.
Several high street stalwarts – including Homebase, Hobbycraft and latterly River Island – have been pushed into administration since the changes were announced. And earlier this week, insolvency specialist Begbies Traynor judged the retail industry to have endured the third most extreme rise in businesses under “critical financial distress” over the past year.
Dickinson warned that the failure of more household names from her industry would be a “natural consequence” of another bout of tax rises.
“It wouldn’t just be more of the same,” she said in reference to the effects that a higher tax burden would have on her body’s members. “It would be an acceleration and we would see more business failures.”
“These are well-loved businesses and recognisable brands,” she added, highlighting that when a retail chain closes “it isn’t just the closure of a business, it is the loss of something that is part of the heritage of the country”.
Tax is retailers’ top concern
Dickinson’s downbeat tone was reflected in a poll of finance directors and chief financial officers commissioned by the BRC, in which 88 per cent raised “the tax and regulatory burden” as one of their top three concerns. This represented a rise of over 20 percentage points since the lobby group last polled its members on the question in January.
Asked what actions their business had taken – or expected to take – as a result of “recent business tax changes”, 85 per cent said they had raised prices and two-thirds expected more price hikes to come. Over six in 10 admitted to having reduced headcount, while 42 per cent said their firm was continuing to implement a hiring freeze.
The survey, which polled finance bosses at firms which collectively employ over 300,000 people, found negativity to be rife among retail leadership. Over half said they felt “pessimistic” about trading conditions over the next 12 months, with only 11 per cent voicing optimism.
“[Our members] are concerned,” Dickinson said. “They are dealing with the consequences of a big series of increasing costs. The market trading conditions are not super buoyant at the moment. And therefore many businesses have had to face into some difficult decisions over the last few months.”
Separately, the CBI’s latest business optimism index found negative sentiment endures across sectors, with confidence having taken a hit every month since last year’s Budget. The last positive reading it received for firms’ expectations on output volumes for the following three months was in August last year, it said.
The Treasury did not respond to a request for comment.