18 May 2024, 19:59
By Furniture News Nov 11, 2015

BRC advises Government ahead of Autumn Statement

The British Retail Consortium (BRC) has issued a preparatory statement in advance of the Chancellor's Autumn Statement, taking place on 25th November.

"We support the Chancellor’s vision for a long-term business strategy for Britain," says the BRC on behalf of its retailer membership. "We believe this should include a system of business taxation for the 21st century, and we support the plan to bring higher wages to working people and are committed to delivering it.

"The combined cost of policy announcements since the election adds up to over £14b to the retail industry over the next five years. It’s too early to be definitive, but we believe that the impact on jobs and therefore social cost could be significant, especially in vulnerable areas, in two to four years from now.

"We are making a massive contribution to increasing wages and providing training and jobs – and we are committed to identifying the additional £2.6b per annum required to do this. We can do it on such a scale because our industry employs three million people right across the UK – more than any other. We can help build the Northern Powerhouse because we invest in jobs and infrastructure at local community level around the country."

"We still need fundamental reform of business rates, and we do not include devolution in this. The Chancellor needs to reduce the disproportionate burden of business rates on the retail industry and keep going with the structural review, because this is the key to delivering the core of the Government’s reform programme. We recognise that this is going to be difficult in the short term and would be happy to see the December 2015 deadline for the review extended.

"We also need short terms reforms on rates. There are some more modest reforms – in particular in relation to how the system works, with more regular revaluations and roll over of reliefs – that are important for our industry, even though the financial impact is less. Our industry is changing very quickly and we need to have more dynamism in the system even if it is not yet possible to make the more radical changes needed to the structure of taxation.

"The key characteristics of our industry are flexibility and innovation, so if any industry can support the Chancellor to increase pay, it's retail. We constantly adapt and innovate our business models and use the intensity of competition to deliver good prices and quality to our customers. Retailers are always looking across their businesses for ways to do business better – retailers have already been responding to the Living Wage, and more will be in the near future, but the consequences of National Living Wage implementation haven’t been fully thought through by Government.

"In order to maintain employment levels, progression opportunities and social mobility and wage differentials, we need the flexibility to do it. Our largest non-controllable fixed cost is business rates, so this is the obvious answer.

"But there is nothing we can do about reducing our business rates bill other than closing shops – impacting local employment and reducing local investment. The total annual rates bill for the retail industry is currently £7.8b – left unchanged, this is estimated to grow to £8.8b by 2020.

"We still need fundamental reform of business rates"

"We pay proportionately more rates than any other industry, at the same time as being able to deliver more on the Living Wage and apprenticeships than anyone else. The BRC’s analysis shows that the impact of the increase in business rates, the National Living Wage rise and the apprenticeship levy adds up to £14.2b over the next five years.

"So, the solution is obvious. We’ve been putting the case for structural reform of rates, and the Government committed to this in last year’s Autumn Statement. We don’t believe that the announcement to devolve the rates represents structural reform.

"In this year’s Autumn Statement, the Chancellor should re-commit to the structural review, and to work with our industry to achieve it. If this means it takes longer than the December 2015 deadline, we can live with that – in the meantime, he should freeze the multiplier until 2017 and then lower it to rebalance business taxation away from property-intensive industries. This will give the industry the flexibility needed to implement the National Living Wage in a way that helps the Government achieve the objectives it seeks

"What happens the Chancellor does nothing? It will be a lost opportunity to combine the Government’s strategic objectives of increasing low wages and maintaining and creating jobs and investment. The risk is there will be more people stuck on lower pay, flatter pay structures with far less opportunity for progression and fewer jobs. Retail will continue to be overtaxed on people and property, which will get in the way of developing communities, jobs and growth, and the re-invention of our high streets – especially outside of the South East – will be slower than everyone would like to see.

"Where are we now? Whilst we respect the Government’s mandate to address the state of public finances, there is a risk that the industry will become frustrated at the lack of engagement on key policy issues such as devolution for rates, Sunday trading and National Living Wage where it is not clear there has been sufficient appreciation of the consequences and execution. We really do need to see a clear path forward on business rates, and especially the question of the overall burden of rates on the retail industry.

"If the highlight of the plan on business rates was devolution, then we don’t believe this is enough, especially as the increased cost over five years will be another £1b. Reductions in corporation tax do not make a dent for retail, because we pay £2.30 in rates for every £1 we pay in corporation tax.

"Much has been made of the claim that tax credits are a wage subsidy for retailers. This ignores the fact that we are among the highest tax payers in the country because of property tax and NI, as well we being the main collectors of VAT.

"The number of town centre shops declined from 149,000 in 1990 to 129,000 in 2014 and, with over 60% of leases up for renewal by 2017, the end of the lease presents retailers of all sizes with a choice of whether to close down unprofitable stores as their leases end. The BRC estimates that if these leases are not renewed, there will be an estimated 80,000 fewer shops.

"The total annual rates bill for the retail industry is currently £7.8b. This is estimated to grow to £8.8b by 2020, using HMRC RPI forecasts.

"Without mitigation and maintaining wage differentials, the National Living Wage would increase the UK retail wage bill by approximately £2.5b a year. This assumes a 6% rise per annum is passed through the wage structure

"The BRC estimate the cost of the Apprenticeship Levy will be £126.8m in its first year, and have applied a compound average growth rate of 1.4%.

"These three measures combined represent an extra £14.2b of potential costs to UK retail businesses over the next five years."

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