Introduction of the National Living Wage the key measure impacting retailer

The most striking announcement impacting retailers made by the Chancellor is the introduction of a national living wage which is being introduced at a rate of £7.20 per hour in April 2016.

The national living wage will apply to employees aged 25 and over and will increase to 60 per cent of median earnings by 2020, which is likely to be around £9 per hour.

The impact of this on retailers will vary according to their specifics but an increase in labour costs of circa 30 per cent over 5 years will put pressure on margins.

The possible increase in Sunday opening hours may cause a dilemma for traditional retailers and whether this will create an opportunity for further sales may vary significantly according to location. Retailers will be keen to avoid increasing their cost base by opening longer without the appropriate increase in revenue.

The announcement that the annual investment allowance will be set at a level of £200,000 from 1st January 2016 will be welcomed although this in effect is a reduction from the current level of £500,000. Retailers should be mindful of this reduction and where possible incur any expenditure that would qualify for the annual investment allowance prior to 31st December 2015.

The reduction in corporation tax rates to 19 per cent and ultimately 18 per cent will go some way towards reducing the impact of the increased national living wage and the wider budget measures will increase the consumer spend available to certain consumers.

However, the era of austerity continues and in an ultra-competitive retail environment, the budget has not made the landscape any easier.

If you need any advice on how these announcements might affect you please contact Rupert Eastell.