UK’s Spring Budget: What to know and how the industry is responding

Jeremy Hunt outlined his Spring Budget earlier this week and, like his prior Autumn Statement, was met with mixed reactions from the retail industry as a whole. His speech to MPs began by outlining the government’s achievement of lowering inflation from 11 percent, when prime minister Rishi Sunak came into office, to 4 percent, which Hunt said “more than [met] our pledge to halve it last year”.

He continued that the new forecast issued by the Office for Budget Responsibility (OBR) now expects inflation to fall below the 2 percent target in “just a few months’ time”, in what he said would be “nearly a whole year earlier than forecast in the Autumn Statement”.

This, however, has not come with ease. Hunt noted that “painful” efforts to reduce inflation have been put into place through higher interest rates and a period of lower growth, and as such “further steps to help families with cost of living pressure” are to fall into place via the Spring Budget.

In terms of growth, Hunt said that on his appointment, the OBR expected gross domestic product (GDP) to fall by 1.4 percent last year, albeit figures actually slightly grew, with the organisation now expecting the economy to grow by 0.8 percent this year and 1.9 percent next year. He added: “Since 2010, we have grown faster than Germany, France or Italy, the three largest European economies, and according to the IMF we will continue to grow faster than all three of them in the next five years.”

How the industry is responding

BRC: ‘The chancellor does not share our ambition’

The British Retail Consortium (BRC) was among the organisations to disapprove of the changes – or lack thereof – outlined by Hunt. In a statement, CEO Helen Dickinson said that the chancellor did “not share in [the BRC’s] ambition” to support a “net-zero, digitally transformed future” for retail, which she said would miss out on investment opportunities.

Dickinson’s comments are in reference to the failure of Hunt to reverse his decision to raise business rates from 51.2 pence to 54.6 pence from April 2024, a move he outlined in his 2023 Autumn Statement. She noted that the chancellor had “done little to promote growth and investment, instead hindering it with the business rates rise”.

She continued: “Government inaction will now cost the retail industry 470 million pounds extra every year in business rates – money that could have been better spent improving our town and city centres, investing in lower prices, and maintaining jobs and commerce all over the UK. How can a whopping 6.7 percent tax rise in April be justified, when the chancellor himself is saying inflation is forecast to be nearer 2 percent.”

Retail NI: ‘There are a number of positives for Northern Ireland…’

Retail Northern Ireland (NI) had a more positive outlook towards the statement. The organisation’s chief executive, Glyn Roberts, welcomed the extension of the Long-term Plan for Towns, with investments of 20 million pounds to also now go towards Derry and Coleraine. Roberts also expressed gratitude for the extension of the UK Recovery Loan Scheme and the rise in VAT registration, yet said he would be seeking more detail on the 150 million pound Enhanced Investment Proposal and how the 100 million pounds for NI would be spent.

FSB: ‘Still a gap when it comes to the crunch small firms are facing..’

Like Roberts, the Federation of Small Businesses (FSB), also welcomed the increase in VAT threshold, and showed further gratitude for the cut in national insurance and the extension of the Recovery Loan Scheme. Policy chair Tina McKenzie, however, noted that while these were welcomed changes, small businesses “will have understandably hoped that there would be more measures announced” to help ease tough decisions.

McKenzie added: “There’s still a real gap when it comes to the crunch small firms are facing – and the growth, jobs and economic security small businesses provide is not something the country can afford to risk. While keeping the 5,000 pound Employment Allowance for the 10th year in a row is invaluable, it should have been uprated to keep pace with the National Living Wage – especially if employer tax thresholds remain frozen. The government must not be overconfident on jobs and hours in this economic environment.”

BIRA: ‘Missed opportunity in not addressing the planned 7 percent increase…’

Similarly, the British Independent Retailers Association (BIRA), also welcomed a number of the decisions, yet further expressed concern surrounding the failure to reduce business rates. CEO, Andrew Goodacre, said: “While we acknowledge the positive impact of the NI rate cuts on consumer spending, there is a missed opportunity in not addressing the planned 7 percent increase in business rates, which remains a concern for the retail sector.

“We remain cautious about long-term economic growth, and there is the need for initiatives that drive employment and production. The association believes that sustained economic growth is crucial for the growth of businesses, and more measures are needed to support this aspect.”

VAT-free debate continues

One area that was also notably excluded from the budget was that of the controversial ‘Tourist Tax’, a topic that has been highly debated since the UK’s tax-free shopping scheme was put to a halt in 2021. This comes despite over 500 business leaders from the likes of Marks & Spencer, Primark and Harvey Nichols, having come together earlier this year to sign an open letter to Hunt demanding for the government to make a U-turn on its decision after it left “British businesses at a significant disadvantage”.

The chancellor had initially promised that he would “look again at the numbers” and indicated that he hoped the restoration of tax-free shopping would “prove affordable”, however failed to make any immediate decision in his latest budget.

Responding to the lack of movement in this area, Anda Rowland, vice-chairman of tailoring retailer Anderson & Sheppard, said: “Small British businesses are really suffering from the fact international visitors aren’t spending. People are simply choosing to shop in Paris, Milan and Berlin rather than here because the VAT rebate has gone.

“It’s affecting not just retailers but manufacturers and artisans right down the supply chain. Skills will also be hit as businesses have less to invest. I just wish that the government would adopt a more welcoming approach to people choosing to come and spend here in the UK.”

Chairman of F Hinds, Andrew Hinds, added: “It’s extremely disappointing that the chancellor has not taken action in the budget to scrap the tourist tax. The message from business could not have been clearer that this move is desperately needed to kickstart economic growth. This goes way beyond a few luxury retailers in the West End of London – we are seeing the impact of the removal of tax-free shopping in our 127 stores in high streets up and down the country.

“At a time when we should be doing everything possible to boost the economy, sending a message that the UK is closed for business when it comes to tourist spending makes absolutely no sense.”