Although Rishi Sunak’s spring budget has been largely welcomed by the retail industry, there have been several issues raised about caps on funding, EU state aid rules, and increased corporation tax.

Capped Funding

The British Retail Consortium welcomed the extension of key business funding schemes, but has expressed concerns about capped funding.

“Action to support the retail industry will be vital to reviving the economy – including business rates relief, restart grants and loans, and an extension to the furlough scheme,” said Helen Dickinson, chief executive of the BRC. “However, for many retailers the devil will be in the detail, with caps on funding limiting access to this support.”

Dickinson urged the chancellor to “keep the situation under review” as the UK awaits the economic response to the reopening of non-essential shops next month.

Business rates

Dickinson said that while the chancellor has taken steps to avoid the business rates cliff edge on 1st April by deciding on a three-month extension, beyond this point relief is capped at only £2 million for closed businesses, which is “a tiny fraction of their total liability.”

“Without further funding, it is likely that many ‘non-essential’ retailers will struggle under sluggish consumer demand and high Covid costs,” Dickinson warned. “The business rates system remains broken; it is vital that the ongoing business rates review delivers on its promise to reduce the burden on retail which already results in store closures and job losses.”

“Retail accounts for over three million jobs, spread across every region of the UK; supporting the success of our industry will be essential to unlocking consumer spending and driving forward the UK’s economic recovery,” added Dickinson.

Increased corporation tax

The announcement of increased taxation was recognised as a “fairer way” to restore public finances by the Consortium, however it warned that higher corporation tax must “go hand in hand” with bringing business rates down to a sustainable level.

“On its own, corporation taxes would just be another tax on an industry that has faced rounds of forced closures, high costs of implementing Covid-safety measures, and the recent scrapping of tax-free shopping,” said the chief exec. “It is vital that the ongoing business rates review meets its objective to reduce the rates burden on retail, which is causing stores to close and jobs to disappear.”

Darren Upson, vice president small business Europe at prepaid card payments company Soldo, said that while the Chancellor understandably needs to raise revenue to pay off the “eye-watering” amounts of cash borrowed throughout the course the pandemic, the company worries about the timing of these tax hikes.

“The Chancellor must understand that many SMBs are still struggling. These increases could be enough to impair their future growth. Once lockdown is lifted, the UK will need SMBs to step into gear and bring the economy back to health. These tax rises may hamper their ability to do so,” he said. “In the context of Brexit, the government needs to ensure the UK remains an attractive destination for business. The last thing it ought to be doing is risking putting off investors and entrepreneurs with what may be perceived as a punitive tax regime. Another crucial concern is that these tax hikes may discourage SMBs from hiring. With unemployment creeping up, this move could ultimately prove to be counterproductive.”

EU state aid rules

BRC said that while the announcement of the government’s restart grants was welcome and will provide a “vital injection of funding,” Sunak gave no clarity on EU state aid rules.

“…if these continue to apply to grants for closed businesses, then many larger companies, employing hundreds of thousands of people, will miss out on millions of pounds of vital support,” explained Dickinson. “We need an immediate amendment to the state aid system which is stopping impacted companies from accessing the grants which were announced today, and earlier this year.”

Extension of the furlough scheme

The BRC championed the extension of the furlough scheme, which it said would help protect the future of the 600,000 retail employees currently on furlough.

Commenting on the extension of the furlough scheme, director electric point of sale company Epos Now, Charlie Wright said: “As our research shows, the restart grants are a much-needed lifeline for retail and hospitality businesses, many of which have been relying on the current monthly grant system to just stay above water. Staff wages are the most costly outgoing for most of these businesses, and social distancing requirements may mean they’re only able to bring home half of their usual takings. Extending the furlough scheme gives small businesses, which are the lifeblood of the UK economy, the opportunity to survive the difficult transitional months before restrictions end and workforces can return in full”.

No sign of ‘online sales tax’

Cas Paton, founder and chief executive of UK online marketplace onbuy.com, said that he was pleased that the introduction of an ‘online sales tax,’ which was rumoured to be in the budget, did not come to fruition.

“…a step which will allow Britain to further grow its own e-commerce industry, supporting our retail ecosystem and allowing us to compete on a global stage,” said Paton.

Super Deduction

The onbuy chief exec said that the announcement of The Super Deduction initiative is a welcomed step forward to support the future of British entrepreneurship.

“In association with the restructuring of corporation tax and £5 billion allocated to restart grants, it is clear that the Chancellor has prioritised growth in this year’s budget,” he said. “The newly announced package encourages reinvestment, will help smaller organisations to recover and thrive, and will aid the development of new homegrown British industries. These are all absolute necessities to recover from the impacts of COVID-19 and as we enter our first year outside of the EU.”

E-commerce

Co-founder and chief executive of James and James Fulfilment, the e-commerce fulfilment service, said that neither the extension of VAT and business rate relief, nor retail restart grants would make a significant difference to the rise of e-commerce.

“While it is clear that the government is supporting the High Street with retail restart grants and extended VAT and business rates relief, we encourage traditional retailers to invest in evolving their business models in light of the move towards digitalisation,” he said. “Shopping has changed forever and shifted online; and the High Street must acknowledge this - it needs to assess how to evolve and incorporate e-commerce into its proposition and/or offer a more entertaining and experiential shopping experience that includes online elements, such as fulfilment and delivery direct to consumers homes.”

Help to grow: Digital

Julian David, chief executive of techUK, said that the Budget addresses the urgent need to drive business investment.

"techUK particularly welcomes the creation of ‘Help to grow: Digital’; this scheme, which we called for, will help thousands of SMEs to upgrade their capabilities and create new highly skilled jobs across the UK. Research by techUK and our members have shown that this kind of support is in high demand and we stand ready to do our part to ensure this scheme is delivered successfully,” he said.

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