Budget 2018: where is the desire to reform?

The Budget delivered some help for the High Street and this is welcome for many in retail. However, despite some short term relief there was no evidence of looking to reform an archaic business rates system, according to industry commenters.

The Budget’s main points for the retail sector included the £675 million Future High Streets Fund – helping local authorities shape the High Street of the future.

All business properties with a £51,000 rateable value or less will, from April 2019, have a 1/3 reduction on rates until the next revaluation in April 2021, an annual saving of “up to £8,000 for up to 90% of all independent shops, pubs, restaurants and cafes.”

A 2% digital services tax from April 2020 on, for example, online market place providers (which are both profitable and have global revenue in excess of £500 million).

Accountancy firm Wilkins Kennedy head of retail and wholesale Phil Mullis commented: “The Chancellor acknowledged the High Street was under threat and ultimately fundamentally changing. For those retailers mentioned above, a business rates saving over the next two years will be more than welcome. However, there is no evidence that a total reform of business rates is on the agenda. Many retailers with larger property portfolios will certainly feel left out in the cold by this budget – where was the rates reduction for them?

“However, a digital goods tax did not transpire; rather there will be a digital services tax from April 2020 on social media platforms, search engines and perhaps, more pertinently for retail, on line market places.”

Phil added: “The Chancellor acknowledged that the High Street has to change to adopt the new ways in which people shop. Furthermore, he wishes to relax change of property use e.g. making it easier to convert from retail to housing. The availability of a £675 million Future High Streets Fund will go toward helping local authorities to make the transition.

“Retailers need to be at the top of their game to provide value, product and experience to an ever- demanding consumer in a quickly changing landscape – that is a challenge for the sector. However, the challenge would ease by a complete reform of the business rates system; currently, there is no evidence to show this is on the Chancellor’s radar.”

NFU Mutual retail sector specialist Frank Woods also commented on the Budget.

“The government’s commitment to reduce business rates for the smallest retailers in the UK is welcome, but is not going to satisfy those calling for a more fundamental reform of business rates across the country,” he noted.

“And while the £900m relief will result in short term savings for the smallest shops across the UK, the larger retailers who employ the majority of people across the sector will not receive a direct benefit from this. And of course it is those larger retailers who have been grabbing the headlines over the past 18 months, for all the wrong reasons.

“For them, the question is whether the additional £675m to be invested in high streets will have any impact at all, especially as many of them rely on out of town retail parks for a large proportion of their sales.”

He added: “Taking steps to invest in transformation of city centres supports the widely recognised need for change. Making it easier for properties to be developed as homes to encourage more people to live in central urban areas will also help to build communities in areas where boarded up shops now dominate. Whether it will be enough to staunch the bad news that has been emanating from the sector in recent years is not so clear.

“Minimum wage increases may prove difficult for retailers to absorb, particularly while attracting talent is proving more difficult with Brexit approaching. A freeze on fuel duty will be a relief for those relying on logistics or deliveries.”