Blog: Budget garners mixed reaction from industry
Michelle Russell | 21 March 2013
The industry offered a mixed reaction to the proposed actions set out in Chancellor George Osborne's Budget yesterday (20 March), which included a new employer allowance and a business rates rise.
The Chancellor came up against a not unexpectedly rowdy House of Commons on Wednesday when he revealed a recovery of the country's economy had "taken longer than anyone hoped", but that "we are, slowly but surely, fixing our country's economic problems".
Growth in 2013 is now forecast at 0.6%, half the 1.2% rate the Chancellor predicted four months ago during his autumn statement. Osborne, however, vowed to stick the course on austerity, despite intense criticism from the opposition. He said the country would avoid a "triple dip" recession, and predicted the deficit would continue to reduce thanks to the "many tough decisions" made by the government.
The Food and Drink Federation welcomed the measures set out in the budget and said it shared the vision of the Government to grow the sector by 20% by 2020.
"The new employer allowance will significantly lower food and drink SMEs National Insurance bills and give those businesses greater certainty when considering whether to invest in growth while the announcement of a further cut in Corporation Tax and the cancellation of the rise in fuel duty planned for September will be welcomed across the industry," said FDF director general Melanie Leech.
"The increase to the above the line research and development tax credit to 10% also sends a clear message that the UK welcomes investments in innovation."
But while the food industry hailed the Chancellor's budget, and measures to help small businesses drew a favourable response, retailers were less impressed. They warned of more woe on the high street with nothing to mitigate the forthcoming sharp rise in business rates.
From the start of the tax year on 6 April, retailers will face an estimated 2.6% increase in business rates, which are linked to inflation. This is expected to add around GBP175m to their bills and comes on the back of around GBP500m of increase in rates over the past year.
For the retail industry, this will be a big blow given the challenges already facing the sector. Retailers are increasingly having to transform how they go to market in order to entice technology-savvy, cash-strapped consumers into stores and online.
The British Retail Consortium said it wants the Government to "deliver quickly" on its existing commitment to reassess the formula for determining future years' rates increases.
"One in nine high street shops is currently empty. An opportunity has been missed to make a difference to our troubled high streets and the communities that rely on them," said BRC director general Helen Dickinson. "He's done well for hard-pressed households but could have done more to help retail businesses to help him deliver jobs and growth.
"It's now even more important that the Government delivers tangible action on its existing promise to review the formula for setting rates in future."
While the news may have made for pretty dismal reading for retailers, the industry should look to the latest ONS figures for some comfort.
Sales figures released at the same time suggest there may at least be some temporary relief after a difficult January for retailers.
The weekly spend across all UK retailing was GBP6.3bn in February 2013 compared with GBP6.1bn in January 2013 and GBP6.1bn in February 2012. Online sales for the month were estimated at GBP540.5m, an increase of 10.1% on February last year.
With Britain teetering on the brink of its third recession in four years, this should provide some comfort for the industry. At least for a short while anyway.
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