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Blog // 27/02/2017

Retail: Spring Budget 2017 Predictions

Spring budget 2017

Comments provided by Martin Hamilton.

After a successful 2016 for e-commerce retail, where consumers spent throughout the year and even after the Brexit vote, 2017 is likely to continue in the same vein whilst proving a little more challenging to those bricks and mortar retailers not embracing the e-commerce future.

Martin Hamilton - Menzies AccoutantsGiven how footfall in January has decreased year on year by 1.3% and e-commerce sales have increased by 12% for the same period, the Chancellor has a decision to make as to whether he continues to support the declining high-street or just fully embrace the strengthening of the e-commerce market.

Given the likely increase in business rates and constant increase in car parking costs, the high-street retailers face increased prejudice compared to the e-commerce retailers. Couple this with the triggering of Article 50 and the following uncertainty over the Brexit deal, the Chancellor needs to make some practical and direct decisions.


TAX RELIEF FOR INVESTMENT IN MOBILE TECH AND E-COMMERCE

ecommerce2017 will see the continuance of the rise of e-commerce. By 2020, £43bn or two thirds of e-commerce purchases will be made on a smartphone. If this is coupled with the uncertainties surrounding Brexit, whereby UK retailers may need to be more internationally focused and export more products overseas, then retailers will require a 24/7 worldwide offering.

Retailers need to be encouraged to invest in mobile tech and to help resource investment in this area, the Chancellor should consider introducing a mobile technology tax credit, or similar incentive. Ultimately, HMRC should benefit here as by attracting more consumers, sales should increase and in turn has a positive effect on HMRC tax revenues.


BUSINESS RATES

8 steps to retaining business talentThe impending changes to the calculation of business rates in April 2017 has caused a lot of concern to retailers, especially those in London. The new rates will be based on a property’s rental value, which are to be revalued for the first time in seven years, and as such, those retailers in areas which have seen significant property value increases in that time, are likely to face an alarming rise.

Although the government are extending their business rates relief scheme into 2017, the Chancellor will be under pressure to scrap, amend or delay this additional tax.


MICRO ENTREPRENEURS

Entrepreneur's relief extension

With the proposed £1,000 micro-entrepreneurs allowance to be introduced in April 2017, an increase in the allowance could assist many homeworkers who sell via ‘sharing economy’ websites. £1,000 equates to less than £20 per week, and given the significant growth in the e-commerce sector, upping the limit to £5,000 may assist a greater number.


REDUCTION IN IMPORT DUTY

Transport and logistics while paperWith the value of the pound failing to recover as quickly as many would like, the Chancellor should consider extending some assistance to retailers that import goods from around the world.

Already operating with low margins, many retailers are unable to absorb Forex-related cost increases and passing them on to the customer is not viable and would impact on competitiveness. To take the pressure off the sector, the Chancellor should consider reducing import duty or providing an import credit for retailers. This would benefit both the retailer and the consumer; as prices would remain affordable.


REDUCTION IN VAT

To boost consumer spending, the Chancellor might consider greasing the economy by cutting VAT for a temporary period, perhaps back to 17.5%.

This could be beneficial in the short-term but could have an inflationary effect, encourage imports and increase the balance of payments deficit. This could be counterproductive in the longer term.


INCREASE NATIONAL INSURANCE (NI) ALLOWANCES

The National Living Wage vs. the National Minimum Wage

The retail sector has already been impacted by the National Living Wage, especially since the Brexit vote and the Apprenticeship Levy is set to bring more cost for some from next year. To alleviate these employment-related cost pressures, the Chancellor should consider increasing employers’ NI allowances.

Get more input on the 2017 Spring Budget implications for the Retail & wholesale sector by speaking to our sector team.

Find out more about the Menzies Retail & wholesale business services.

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