Responding to yesterday?s Autumn Statement, the chief executive of the BRC Helen Dickinson OBE said: ?This was a statement of stocking fillers rather than expensive presents. With a post-Brexit slow down forecast to make a big hole in public finances, there was little room for the chancellor to pull out any real crackers. The key takeaway from this statement is that whilst Brexit has not heralded the economic decline some feared, the OBR is expecting a significant dent in UK GDP and hence in consumer spending also.
?As expected, the OBR has revised downwards its March forecast of growth and that means lower growth in consumer spending in the medium term. Whilst the UK economy as a whole will grow 1.4% in 2017 and 1.7% in 2018, household consumption is predicted to grow at just 1.2% next year and 1.1% the following year. This is a significant shift downwards from 2.2% this year.
?The freeze in fuel duty, the abolition of letting fees and the confirmation of the increase in the personal allowance will provide some relief, particularly to families on tight budgets. However, the measures announced will do little to offset the overall expected reduction in spending growth.
?At the same time, the devaluation of the pound will feed through into higher prices. The OBR predict inflation is likely to average 2.3% next year, meaning that each pound in consumers? pockets will buy less, with wage growth only just about keeping up.
?Whilst the outlook is not as bad as some predicted it could have been in the wake of the EU referendum, the next few years will be challenging for the industry.? Whilst shoppers? spending power is falling, retailers will almost certainly have to absorb some of the underlying cost increases into their margins, rather than fully pass them on. As a result, retailers are likely to see slower volume growth at lower margins next year.
?For an industry with around 5% of its expenditure on transport services, the freeze in fuel duty will ease some pressure. However, compared to the coming increases in business rates and the National Living Wage, its impact will be virtually unnoticeable.
?If there was one missed opportunity to help boost growth and investment, it was the absence of further measures to reform the business rates system.?
On infrastructure spending
The transition of retail to higher productivity will require significant investment. That?s why the BRC supports today?s decision to prioritise local infrastructure initiatives, as well large scale projects. There is an opportunity for the new National Productivity Investment Fund to make a difference here. Details of its funding structure will be keenly awaited.
We welcome the ?1.1bn of funding for key pinch points on strategic roads, recognising that small, but targeted amounts targeted can make a big difference to retailers transporting everyday goods 24/7 on the UK?s road network.
Additional funding for Local Enterprise Partnerships should help to support local growth and better-decision making.
On investing in digital infrastructure
Addressing the success of the high street requires consideration of the revolutionary impact of digital technologies – on the behaviour of consumers who might frequent high streets, and the competitiveness of high street retailers. Therefore, today?s announcement of ?1bn in new digital infrastructure including 5G will be welcome by shop owners and consumers across the UK.
On the National Living Wage increase
It is positive that the chancellor has listened to an independent Low Pay Commission with his decision to introduce a sensible increase to the National Living Wage (NLW) from ?7.20 to ?7.50 per hour. The retail industry supports the NLW, which is why many retailers go above and beyond the legal requirement by paying it to staff aged under 25, as well as older colleagues.
On business rates and corporation tax
Business rates have risen disproportionately in comparison to other taxes such as Corporation Tax, with a lasting impact on high streets and town centres. Rates, which are disproportionately impacting property intensive industries such as retail, have steadily increased from approximately one-third of annual rental value to one half.
In this context, the chancellor has missed an opportunity to keep up the momentum behind the reforming of the business rates system by bringing down the burden of rates for retailers. The retail industry will be encouraging the chancellor to look again at measures to help alleviate the pain felt on the high street. Despite recent reform measures, retailers are expected to pay ?550m more in rates than they today.
Read the BRC’s full Autumn Statement submission?
