Wednesday 3rd November, 9.21am. I have just sat down at my desk, coffee in hand to collect my thoughts for this blog piece, and the first thing that struck me is that it is less than a week since Rishi Sunak actually delivered his Autumn Budget Statement.
Such is the nature of the global schedule that we have already filed it as old news, after all we have lived through the G20 and the start of COP26 in the intervening week. But in real terms the ink is barely dry on the Chancellor’s centrepiece document and so it makes sense to draw a few initial conclusions from what was announced last week.
- Inflationary pressures aren’t going away anytime soon.
We are already seeing inflationary pressure on product in the MI space, much discussed increases in shipping costs and the rising cost of production fuelled by the shortage of raw materials has been behind a whole raft of recent price readjustments. Whilst these have been mostly global issues so far they are about to be supplemented by some of the announcements confirmed last week.
The rise in NI to fund Social Care will place a burden on small business, as will the rise in the Minimum Wage. Whilst both policies will have positive impacts for individuals they will mean an increase in overheads, which will undoubtedly have to be passed onto consumers at some point in the future.
- There wasn’t a lot of Green about.
Even with COP26 approaching on the horizon at speed there was a distinct lack of ‘green references’ in the statement. Yes, there was the relief initiative linked to the decarbonisation of commercial properties, but this doesn’t talk directly to smaller businesses in the MI space, particularly those that don’t own their own properties.
Those looking for incentives for SME’s to begin the process of understanding their own journey to Net Zero were disappointed. At some point the Chancellor is going to have to move away from Macro policy solutions and start to help smaller businesses understand the changes they will no doubt have to embrace in the future.
- Retail will remain a Key Contributor
The much-publicised reform of the Business Rates infrastructure turned out to be a bit of a ‘can-kicking’ exercise. I don’t think anybody is suggesting that this will be an easy reform and certainly a few of the measures announced were helpful – namely around the freezing of the business rates multiplier and the more regular revaluation of property.
It is clear however that such a key revenue generator as this one can’t be easily fixed, despite the pretty much universal agreement that it is operating out of kilter with the development and needs of the sector. The Chancellor confirmed that consultation on an Online Sales Tax was ongoing, and that whatever happens the plan remains that such a policy would be used to offset any drop in rates revenue.
It looks like Retail will remain a highly taxed area of the economy for a while to come.
- Can the High Street survive long enough to see Rates reform
Following on from the last point, the one thing that is becoming harder to predict is what the state of the High Street will be by the time a proposal to overhaul Business Rates has been agreed.
The Build Back Better High Street strategy announced over the summer details quite a lot of one-off support opportunities, but the fundamental numbers for bricks & mortar retail still have to add up. Ensuring that Business Rates structure (or some alternative of) is fit for purpose in the here and now remains a pivotal marker for the High Street.
- It might pay to relocate to the Red Wall
Whilst smaller Retail & Hospitality businesses were afforded some relief over the course of the next year as far as Business Rates were concerned, those with Manufacturing concerns weren’t extended the same support. There is a little bit of wiggle room for those companies in a position to develop their properties or invest in renewable energy generation & storage in support of de-carbonisation – but both incentives rely on the ability to invest significantly.
If you believe this administration is going to be around for a while then one option may be to consider relocation. Whilst that might sound like a slightly flippant comment, the old adage of ‘follow the money’ could prove very relevant. Just look at those areas benefiting from the first £1.7bn of support under the Levelling-Up fund, and then cross reference that with the geographical focus of the Freeport program. Just a thought.