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What retail needs from the Budget


The economic outlook is not looking too rosy at the moment. Unemployment reached a 17-year high earlier this week, consumer confidence is low, prices are high and spending is down.

Few disagree that a resurgent retail sector can give the economy the resuscitating shock it needs to deliver much needed growth.

Growth is bound to be the buzzword of Chancellor George Osborne’s Budget next week, with the government needing to convince the nation that it is capable of boosting business as well as cutting the deficit.

Of course retailers are searching for ways to expand too, but with sales stagnating there are currently many constraints which the sector would like to see the back of.

Business rates have been a particular bug-bear for the industry, with most people within retailing believing fees are too high.

British Retail Consortium (BRC) Director General Stephen Robertson has recently complained that retailers currently pay the biggest proportion of business rates of any sector in the UK.

The plan announced on March 18th by Eric Pickles, Secretary of State for the Communities and Local Government department, to localise the control of business rates has been met with mixed reactions.

Wanting to inspire local growth by redistributing tax receipts to the area they are collected is positive, but varying rates across the country is a worry for many.

Robertson argued: “The localised business rate system was scrapped in 1990 because it created huge inconsistencies in rates and left businesses - who have no vote - open to excessive and unpredictable rate hikes.

“At a time like this when local authority budgets are under strain, it would be only too tempting for councils to see businesses as an easy source of extra revenue, ignoring the damage to local economies.”

Retailers will want to hear more details on these plans next week but it is not the only issue causing concern.

The taxing of empty properties is another topic causing ire in the sector. A rate relief on empty properties was removed in 2008 and with national retail occupancy levels at 14.5 per cent as of the end of 2010, the pressure on landlords is becoming pronounced.

Richard Akers, British Council of Shopping Centres (BCSC) President, commented: “The issue of taxing empty property is still very relevant in today’s market.

“We are seeing significant regional inequalities being entrenched as a result of the government’s refusal to budge on this ineffective policy, in spite of unanimous industry support for its dissolution.”

Hard-up landlords and property companies slow the construction pipeline and although shopping centres Westfield Stratford, Parkway in Newbury and Trinity Walk, Wakefield are all due for unveiling this year, there are no new centres planned for 2012.

One area of the retail landscape that has been hit particularly hard by low occupancy is the small town centre, and business groups like the Association of Convenience Stores (ACS) have welcomed the government’s localism drive.

Osborne will need to spell out concrete plans about how it will revive struggling high streets across the country, however, to maintain goodwill from the ACS.

Despite a one-in-one-out commitment made by government on business regulation, rising minimum wage levels and new legislation on tobacco displays show that unwanted burdens are still being placed on smaller retailers.

In an interview with Retail Gazette this week, ACS CEO James Lowman said: “We are very much hoping not to hear rhetoric and policy which suggest moving towards abandoning a town centre first planning policy.

“I’m encouraged by the results of our initial campaign on this and the government says it won’t change these plans - we don’t want to see any subtle language in the Budget that suggests a move away.”

This in a way shows the difficulty for Osborne next week, in that by pleasing the ACS he may be upsetting people like the BCSC who most certainly want to see more out-of-town construction in the coming years.

A myriad of other pieces of red-tape are being eyed for destruction by different sectors of retail but there is one piece of tax law major entertainment retailers will want to see removed.

Low Value Consignment Relief, a European Directive, allows large retailers to ship low cost goods to the Channel Islands and then sell them back to the mainland in order to avoid paying VAT.

Again those supporting smaller retailers want this scrapped as they believe it gives larger operators an unfair advantage, but if it disappears firms such as already struggling sector giant HMV will see its costs unhelpfully rise.

It will be impossible for the Budget to please everyone in the sector, as this would prove far too expensive for a government trying to slash spending, and the desire of different members of the community differ greatly.

Meeting at least some of the demands of the retail sector would, though, show the country that the coalition is as serious about growth as it is about cutting the deficit.

Published on Tuesday 22 March by Editorial Assistant

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