This afternoon Chancellor George Osborne will announce his sixth budget, sure to impact retailers’ future decisions.
There will be “no giveaways. No gimmicks” Osborne has said, with potential for the government to be boosting consumer pockets by up to £6bn.
Important predictions that are set to influence retailers include:
A 12 sided pound coin
A newly designed 12-sided shape pound coin will be included in this £6bn figure, with anti-counterfeiting technology and two different metals, spelling good news for retailers suffering from illegal transactions in store. The coin hopes to combat the circulation of fake coins which currently adds up to a staggering £45m. Every penny (or pound) counts.
In light of this year’s budget predictions, the FTSE 100 index is set to be up by 11 points, as Osborne’s promise of action to support the oil and gas industry has pushed shareholders to the stock market.
Sainsbury’s and Tesco have already benefitted from the increase in confidence, with Sainsbury’s shares up yesterday by 4%, and Tesco’s shares up from 8.5p to 241.4p.
Small businesses are likely to benefit from a review on business rates, with triple net shop closures in Britain affecting smaller businesses. A “radical reform” of business rates that are currently worth £20bn will hope to improve the high street, preventing smaller retailers spending mass money on rents they cannot afford.
Personal Tax Allowance
The amount of tax free income is set to rise to £10,600 next month, with predictions of a possible increase to £11,000. This means that consumers will have more dispensable income to purchase more luxury items. While this year has seen a rise in ‘budget Britain’, an increase of ’12 sided coins’ in the public’s pocket could mean better news for the high street’s failing sectors, mobile phones and women’s clothing. 18% of mobile phone shops closed last year, while a net total of 98 women’s clothing stores were shut in 2014.
Pensioners selling annuities for a cash sum
Larger amounts of income will also be on hand for pensioners looking to sell annuities for a cash sum once they retire. According to the National Association of Pension funds, this will mean that a staggering 5m will be eligible to access pension money in the next five years.
Annuity sales dropped by 64% last year, showing an increase in demand for pensioners wanting to enjoy their money. This will have an impact on retailers, as Hymans Robertson - an Acturial firm highlighted that £6bn could be released from the pension pot from April to July.
Saga, a research firm, found that 8% of over 50’s would buy themselves a few treats with the cash. The pension’s minister, Steve Webb is aware that the reform will increase spending, citing that he’s relaxed if people, “get a Lamborghini, and end up on the state pension”.
Ultra fast broadband will possibly be introduced across the UK, paying attention to the ‘Northern Powerhouse’. This is great news for businesses outside of London or major cities who want to ensure a speedy multi-channel business.
By creating a ‘Northern Powerhouse’, demand for jobs outside of London will increase. This means more talent for Northern companies such as Boohoo, McVitie’s, Misguided and Kellogg’s. The plan will be centred in Manchester while also creating 100,000 new jobs in Leeds, Sheffield, Newcastle and Liverpool. It will work on the infrastructure, energy, science and property in the cities.
Cut in beer duty
A cut on beer tax is great news for the 1m working in the beer and pub sector. It will increase the demand for beer, beneficial for those in the alcohol sector, who have recently suffered from alcohol consumption falling. “Britain’s beer and pub sector is vital to the economy of our country; nearly a million people across the UK rely on the industry for work.” MP for Burton and Uttoseter, Andrew Griffiths said.
The Government will also look to stamp down on tax avoidance. A new offence, ‘economic crime’ will prevent multinational company’s moving profits to lower tax countries in order to avoid tax.
Unemployment and wages
Unemployment levels have fallen drastically in recent years. This is generally positive news but means that wages have stayed the same, leading Britain to focus on budget spending rather than high street stores.
In 2013, high street spending fell from 8% to 7% in 2014. This is arguably down to seasonal retail jobs that look to employ a number of employees on lower incomes.
The government has decided that the minimum wage should increase by 3% to £6.70 per hour, the largest rise in over seven years.
The Budget will be announced at midday and will provide retailers with a 2015 outlook on how they can enhance consumer spending in 2015.