Business rates

Chancellor Rishi Sunak announced businesses in retail and hospitality will be entitled to a 50% reduction in rates in 2022/2023. Despite the move, retailers will in fact be paying 50% more than they have done this past year after being granted 100% rates relief due to the pandemic.

In addition, investment in improvements to businesses will not be subject to business rates for 12 months after that investment is made. Investment incentives will total £750 million will also be introduced.

However, NFRN national president Narinder Randhawa said the news could be a “double-edged sword for small businesses”.

“In an ideal world, we would all like to pay our staff more, and we can understand the Chancellor’s desire to help people at the lower end of the pay scale,” he said. “But the headline increase in the wage rate does not include the increase in National Insurance and pension contributions, as well as the forthcoming social care levy, that employers also have to pay.

“While we broadly welcome the decision to freeze business rates and offer a 50 per cent discount for one year, we will continue to push for long-term reforms to make the system fairer for the independent retail sector.

Colliers International’s head of business rates, John Webber described the move as “disappointing”. He said:”After delaying his response four times in the last year, the Chancellor has yet again missed a golden opportunity to reassure businesses and to instigate the fundamental reforms campaigned for and needed- particularly for the beleaguered retail sector.

“There were some positive announcements today – but overall, the Chancellor’s measures were underwhelming. The Chancellor has made it clear he is determined to continue to raise “£25 billion from this tax and as a result his proposals only tinker with the system. The measures suggested will not have a major impact on saving the high street in the longer term.”

However, ACS chief executive James Lowman added: “While these measures are welcome in the short term, they must be supported by long term reform of the business rates system that ensures that retailers can focus on driving growth, efficiency and productivity. Convenience stores have kept Britain going through the pandemic and are at the heart of our recovery and future growth.” 

A spokesperson from the Federation of Wholesale Distributors added, “The 50% business rates discount for retail, hospitality and leisure is to be welcomed but this discount must also apply to the food and drink supply chain which supplies our vital public sector infrastructure in this country and that has received comparatively very little help from the government throughout the pandemic.”

Autumn Budget 2021: 50% business rates discount for the retail sector

National Living Wage increase

In April 2022, the National Living Wage (NLW) will rise to £9.50 per hour for staff aged 23 and over, with the National Minimum Wage (NMW) rising to £9.18 per hour. This is in line with the government’s existing policy ambitions to raise the NLW to two thirds of median earnings by 2024. 

Lowman said: “The increase in the NLW to £9.50 is in line with the established policy of this rate equalling two-thirds of median earnings by 2024. This will bring a pay rise for many of the 392,000 people working in local shops, but significantly increase the costs of those running these stores, who are working longer and longer hours to keep their businesses afloat. 

“We now need to see an Employment Bill to tackle the burgeoning shadow labour market based on avoiding paying the NLW and other costs, using gig economy practices to undercut the flexible and secure work offered by local shops.”

A spokesperson from the Federation of Wholesale Distributors added: “Whilst our members support the NLW in providing a minimum wage standard, we have concerns regarding the forthcoming increase during a time of major economic upheaval. The Covid-19 pandemic and Brexit have seriously impacted wholesalers’ revenues and disrupted the growth of their businesses. Further costs will detrimentally impact the sector.  Looking ahead, there should not be a fixed target to achieve 66% of medium earnings, the Government must and should consider the economic impact such decisions will have on the sector and the wider economy.”

Retailers to experience a delay in business rates reform

Fuel duty increase scrapped

Sunak also announced that initial plans for a rise in fuel duty had been scrapped, which will save the country £8 billion. The fuel duty will continue to be frozen for a further 12 months, with the scrap aimed at helping working class households.

The cost of a barrel has more than doubled over the last year, from £40 to around £85 now. Some analysts predict this could pass £90 by the end of the year.

Brian Madderson, chairman of Petrol Retailers Association welcomed the confirmation, he said: “The cost of filling the typical 55-litre tank in a family car is now £20 more than it was in May 2020, when the average petrol pump price plunged to 106.48p a litre in lockdown. The typical motorist fills up twice a month, meaning fuel bills have increased by around £40 a month over this period.

“With pump prices at an eight year high, PRA has been lobbying Government and the Treasury, in particular outlining the potentially damaging effects on the economy and household budgets of even an inflation-linked rise, so it is positive to hear the Chancellor’s commitment.”

NFRN’s Randhawa added: “With petrol and diesel prices at an all-time high, the cancellation of a planned increase on fuel duty will come as a relief to those retailers who provide home delivery services – something that has increased markedly since the start of the Covid pandemic.”

UK National Living Wage is set to rise to £9.50 an hour by April 2022

Alcohol duty reforms

Sunak introduced a simplification of the alcohol duty system which will include “slashing the number of main duty rates from 15 to 6”, including higher rates for strong alcoholic drinks.

High percentage alcohol will see an increase in tax, ending the “era of cheap high percentage alcohol being sold”, with low alcoholic drinks seeing a tax decrease.

The government also announced the restructuring of English Sparkling wine, so that duty is levelled at the same rate as Still wine, ensuring it is competitive to international markets.

Andrew Carter, chief executive of Chapel Down Group, England’s leading wine producer said: “The Chancellor’s patronage will make us more competitive against our worldwide competitors and this change will enable us to reinvest in our business and to continue growing at pace.”

In response, Ian Wright chief executive of The Food and Drink Federation noted the concerns over the success of the government’s Plan for Growth, stating that whilst they “welcome the 50% cut in business rates, the simplification of alcohol duty and the additional support for R&D”, the success of these changes should be judged on whether it “delivers the skilled people that we so desperately need.”

“Today’s Budget does little to address the labour shortages which grip the nation. It is was also worryingly short on action to tackle rising inflation. Given the pressure they are facing, many manufacturers will simply have no choice but continue to pass costs down the chain.”

On this, Lowman said: “On one hand, the Chancellor is implementing reform of duty rates to make the system simpler, but on the other, the new ‘draught relief’ will make the system more confusing. As the line between on-trade and off-trade becomes increasingly blurred, duty should be applied at the highest point of the supply chain. We urge the Government to focus on tackling the billions of pounds worth of non-duty paid alcohol that is damaging responsible retail businesses and the communities that they serve.”

EXCLUSIVE: NFRN urges government to support local shops in Autumn Budget

Tobacco tax

The cost of a pack of cigarettes is set to go up to £13.60 from 6pm today in new tax hikes, which will see the price of a 20-pack soar by up to 88p, with the extra levy coming into effect on the 27 October.

This measure increases the duty rate on all tobacco products by the Tobacco Duty escalator of 2% above the Retail Price Index (RPI) inflation.

The duty rate for hand-rolling tobacco will rise by an additional 4%, to 6% above RPI inflation and the Minimum Excise Tax (MET) will increase by an additional 1%, to 3% above RPI inflation this year.

‘Smoking kills’ to be on every cigarette under new proposed tobacco rules

Green investment incentives

Sunak also announced that green investments such as solar panels and heat pumps would be exempt from business rates. Additionally, investment in improvements to businesses will not be subject to business rates for 12 months after that investment is made.

ACS’s Lowman said in response to the announcement that, “It was great to see the Chancellor announce action to incentivise investment through the business rates system, something we have been calling for in our discussions with Ministers for many years. The 50% relief on 2022/23 business rates is a significant step towards our recommendation for a full exemption for premises under £51,000 rateable value.”

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