On Wednesday, Chancellor Rishi Sunak used his Budget speech in the House of Commons to announce a raft of measures aimed at helping retailers get back on their feet after a year that saw the industry’s pre-existing challenges exasperated by the Covid-19 crisis.
One of the key elements was how the business rates holiday would be extended until the end of June. For the remaining nine months of the tax year, business rates would be discounted by two-thirds. This only applies to England, and separate announcements were made in Wales and Scotland.
Sunak also confirmed the furlough scheme would be extended until the end of September, and employees will continue to receive 80 per cent of their salary for hours not worked.
The Budget also featured a “new restart grant” that would be provided in April to help businesses reopen as the phased lockdown exit plan ramps up from that month. Sunak said that because non-essential retailers were due to reopen first, they would receive grants of up to £6000 per premises.
There were other elements to the Budget that pertained to the retail industry, such as a new Recovery Loan Scheme that will replace previous Covid-19 loan packages, an increase in the national minimum wage £8.91 an hour, a new Help to Grow scheme that small retailers can apply for, and more than £1 billion for 45 new towns deals.
There is also an increase in the corporation tax from 19 per cent to 25 per cent in 2023. This would only affect retailers that have profits of £50,000 or more, and the tax rate would tapered from that level upwards. Sunak said only businesses with profits of £250,000 or greater would be taxed at the full 25 per cent rate.
The UK economy is expected to return to pre-Covid levels by the middle of next year – six months earlier than previously anticipated. With that in mind, Retail Gazette sought commentary from industry experts about the three key elements of the Budget: the business rates holiday extension, the restart grants, and the furlough scheme extension.
The Coronavirus Job Retention Scheme, which has protected more than 11 million jobs across all sectors since its inception last year, has been extended until the end of September. The scheme had been due to close at the end of April.
This means employees who have been put on furlough due to the Covid-19 pandemic will continue to receive 80 per cent of their salary – capped at £2500 a month – for hours they have not worked until the scheme ends. However, employers will be asked to chip in 10 per cent from August and 20 per cent from September.
The extension comes as good news for retail workers, particularly as the Confederation of British Industry had urged the UK Government to extend the furlough scheme back in January. It’s estimated that almost one million workers in retail are currently on furlough.
The BRC in particular welcomed this element of the Budget.
“We welcome the extension of the furlough scheme, which provides retail colleagues with a safety net against unnecessary job losses,” its chief executive Helen Dickinson said.
“This generous scheme will help protect the future of the 600,000 retail employees currently on furlough.”
Chris Brook-Carter, chief executive of industry charity RetailTrust, said UK retail “desperately needed certainties” to help support the UK’s four million-plus total retail workers.
“Extending the furlough scheme will safeguard roles during the uncertain reopening period, while extending the business rates holiday and providing access to the new restart grant will help get retailers back up and running so that staff can get back to work as soon as possible,” he said.
“Retail will have an absolutely vital to role to play in tackling issues like youth employment and social mobility as we move out of this crisis so decisions taken now will not only protect vital jobs and businesses, but the social, economic and cultural importance of the sector to the UK.
“People working in retail have been hit hard financially, emotionally and physically during the entire course of the pandemic. They have had to cope with extremely difficult changes in their working conditions, livelihoods have been placed on hold during the lockdown periods.
“Tens of thousands of people have been left with no jobs to return to due to the pandemic’s devastating impact on shops and businesses up and down the country.”
Small Business Britain founder Michelle Ovens highlighted that the furlough extension was an “absolute lifeline” for many small retailers and their staff, helping to preserve jobs and livelihoods. Moreover, any small or independent retailer with profits of £50,000 or less will be exempt from the corporation tax increase.
Business rates holiday extension
In March last year, just as the UK was about to enter its first lockdown, Sunak announced a one-year holiday on business rates payments from high street premises. The tax relief was aimed at helping retailers, leisure and hospitality firms that were battered by the pandemic, particularly after the enforced shut down of shops through lockdowns.
On Wednesday afternoon, Sunak said the business rates holiday would be extended until the end of June for hard-hit retailers and hospitality and leisure firms that operate premises on high streets, shopping centres and retail parks up and down England.
Sunak added that for the remaining nine months of the tax year, business rates would still be discounted by two-thirds, up to a value of £2 million for closed businesses, with a lower cap for those who have been able to stay open during lockdowns due to “essential” status.
This element of the Budget only applied to England. The devolved governments in Wales and Scotland both recently announced their own schemes that included a 12-month extension on business rates in their respective countries. The Northern Ireland Executive is facing pressure to follow suit.
The business rates holiday had originally been due to expire at the one year-mark in April. The recent extensions come shortly after the Treasury said it would delay its business rates consultation report until autumn.
Marks & Spencer chief executive Steve Rowe last month warned that thousands more job losses would be on the horizon if the UK Government did not overhaul the property tax regime. He said the “seismic upheaval” caused by the pandemic would lead to doom and gloom unless the “unbearable yoke” of business rates underwent a “fundamental review”.
Sainsbury’s welcomed the business rates holiday extension and discount scheme in England shortly after it was announced. While it became the first retailer since the Budget to say it would forgo the relief yet again, it also called for reforms.
“We look forward to broader conversation and consultation with government on over-arching business rates reform and a review of business taxation in the round,” Sainsbury’s said in a statement.
“We believe fundamentally that business rates are an outdated and unfair burden on retailers with physical stores and need to be permanently reduced.”
The BRC cautiously welcomed the business rates extension, highlighting how it wasn’t enough and re-iterated previous calls for a review of the system.
“The Chancellor has taken steps to avoid the business rates cliff edge on 1 April, and the three-month extension will provide essential funding at this challenging time,” Dickinson said.
“Beyond this point, relief is capped at only £2 million for closed businesses, a tiny fraction of their total liability. Without further funding, it is likely that many ‘non-essential’ retailers will struggle under sluggish consumer demand and high Covid costs.
“The business rates system remains broken. It is vital that the ongoing business rates review delivers on its promise to reduce the burden on retail which already results in store closures and job losses.”
John Webber, head of business rates at real estate firm Colliers, criticised the government for its “superficial tackling” of business rates issues in the Budget. He argued the extension was not enough that there should have been at least a six-to-12-month full rates holiday instead, allocated on a needs basis to give businesses proper time to recover from the pandemic.
“The Chancellor has done the bare minimum and has not provided the across the board support needed by UK businesses,” he said.
“The Chancellor has missed a golden opportunity to reassure businesses and clarify his business rates strategy in the Budget.”
Chris Turner, chief executive of Business Improvement Districts organisation British BIDs, also slammed the government.
“This has been a very mixed response to what has been the crisis of our time,” he said.
“Extensions of the business rates holiday, VAT cuts and furlough will protect jobs and help our towns and cities get back on our feet.
“However, the business community needs stability beyond the next few months, and we would have liked to see these extensions for a full year.”
Retail expert Nelson Blackley re-iterated how the UK retail industry was calling for a “fundamental reform” of the business rates system.
“The government had previously announced that the outcome of their much-delayed review, which started last July, and originally scheduled for this spring, was going to be pushed back until autumn,” he told Retail Gazette.
“It appears the Chancellor will make some form of announcement about their proposed way forward at the autumn Budget. So, frustratingly, this remains as a huge and unresolved challenge for the sector.
“There was also disappointment by many offline retailers that the Chancellor made no mention of an online sales tax to ‘level the playing field’ between them and online retailers.
“Many people were surprised there was no mention of an extension to the current rent moratorium for retail tenants. The assumption must be that this lease forfeiture and debt enforcement moratoria will now end in March and if so, it is going to cause a lot of pain.”
New West End Company chief executive Jace Tyrrell said the the business rates extension “delivers too little” for major commercial centres missing out on tourism and office workers where rebuilding traffic, trade and tourists will require years of effort.
As part of the Budget, Sunak also launched a £5 billion grant scheme that will help pubs, restaurants, shops and other businesses in England hit hardest by the pandemic. He said these new grants were on top of the £20 billion the government has already provided.
Non-essential retailers will be eligible for “restart grants” of £6000 for each premises they operate. This grant rises to £18,000 for outlets in the hospitality, leisure and personal care sectors, which will reopen later.
The devolved administrations in Scotland, Wales and Northern Ireland will receive an extra £794 million in funding to implement their own stimulus schemes.
While the BRC welcomed the new restart grants, it highlighted how the Chancellor provided no clarity on EU state aid rules.
“Restart grants provide a vital injection of funding during this extremely challenging period,” Dickinson said.
“No businesses have remained untouched by the pandemic and we welcome this cash to help ‘non-essential’ retailers improve safety measures, build up stocks, and prepare for reopening.
“However, the Chancellor gave no clarity on EU state aid rules – if these continue to apply to grants for closed businesses, then many larger companies, employing hundreds of thousands of people, will miss out on millions of pounds of vital support.
“We need an immediate amendment to the state aid system which is stopping impacted companies from accessing the grants which were announced today, and earlier this year.”
Separately, as part of a new Help to Grow scheme, 130,000 small and medium-sized businesses will be helped back on to their feet after the crisis with £520 million worth of funds to help them to gain access to management training, technology advice and discounted software to improve productivity.
Meanwhile, as the government-backed Bounce Back Loan (BBL) and Coronavirus Business Interruption Loan Scheme (CBILS) comes to an end on March 31, the Chancellor said these would be replaced by the new Recovery Loan Scheme. This would allow businesses of any size to apply for loans from £25,000 up to £10 million until the end of the year, with the UK Government providing lenders with an 80 per cent guarantee.
In addition, more than £1 billion will be available for 45 new Towns Fund deals, designed to help to “level up” regional towns and give them the tools to design and implement a growth strategy for their area, and aid recovery after the pandemic subsides.
Turner said the £5 billion in restart grants was a “much needed lifeline for businesses” but retailers would need to make sure they get this money “as quickly as possible”.
Ovens agreed. She said this support was “absolutely critical”, particularly for small retailers.
“The ‘Help To Grow’ programme is a welcome step towards growth, but will require a combined effort from both public and private sector,” she added.
“We all have a role to play in getting through this crisis and returning businesses and communities to growth, so they can thrive again.
“Small businesses do continue to need support from across the economy, with spend, supply chains, skills and mentoring, as well as financial support from the Treasury.
“We know small businesses will be the engine of recovery for the UK economy and embracing all opportunities like digital training, digital vouchers and expert management training will be key to unlocking that potential.”
Ovens also said the new loan scheme was “absolutely the right thing” for many businesses to get through the crisis.
“Recognising the way the Bounce Back Loan scheme helped many businesses keep going, and for many, given them more confidence and optimism, the details of the lending programme will be important, but overall is good news for businesses,” she said.
“With high streets at the heart of communities, and playing a critical role during the pandemic in providing local support, we are encouraged by the £1 billion announced for new town deals to invest in communities.
“The return to local during the pandemic has highlighted the importance of this and we should look for new ways to build back community hubs going forward.”