Following the Chancellor Philip Hammond’s first Autumn Statement, Roberto Lobue – Partner and Head of Menzies Retail sector team – has reviewed the announcement in line with their impact upon the UK Retail sector.
It’s tough times ahead for retailers as the Chancellor announced forecasts which point to higher borrowing and slower growth for the UK in the next few years.
There were few surprises in Philip Hammond’s first Autumn Statement and only limited items that will provide encouragement to retailers in the week where Black Friday offers begin to hit the market.
National Living Wage
As expected, National Living Wage will increase £7.50 in April, an increase that affects the retail industry especially and whilst the government are going ahead with their plans to reduce corporation tax to 17%, it was hoped that this would be reduced even further to counteract the uncertainty in the economy brought about by Brexit and other world events.
Now, more than ever, retailers are going to have to forecast carefully and plan how to deal with the cost increases coming their way in the months ahead.
Employer Tax-Free Benefits
The Chancellor will also be restricting the tax-free benefits offered by salary sacrifice schemes from April 2017. The impact of this will be a real issue for retail companies who use these schemes to attract and retain good employees.
They will be no longer be as attractive and companies will forced to make a decision between keeping the schemes and absorbing the additional cost themselves or potentially removing them and upsetting key employees.
The positive news was that the chancellor also announced a £6.7bn package to reduce business rates and £400m to improve small business finance through the British Business Bank. Business rates in particular are of key concern to retailers in London and the South East who are expected to see large increases in their rates following next year’s rates revaluation. Mr Hammond did say the government will lower the transitional relief cap from 45 per cent next year to 43 per cent, and from 50 per cent to 32 per cent the year after but these aren’t significant changes in a time when retailers were hoping for the increases to be spread much more.
National productivity investment fund
Mr Hammond also emphasised a real push on productivity throughout his first (and last) Autumn Statement and revealed a new national productivity investment fund worth £23bn which will focus on innovation and infrastructure and which is definitely welcomed. Improving local transport networks can only be a good thing for retailers as are the plans for improving UK connectivity and the moves to double the UK’s export finance capacity.
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Get more input on the 2016 Autumn Statement implications for the Retail & wholesale sector by speaking to our sector team.