What does the Chancellor's Budget mean for consumer businesses?

Fiscal Phil has announced the Government’s last Budget before Brexit, assuming it happens. But what does it mean for the consumer markets sector from an operational perspective, notwithstanding other announcements that could impact business owners such as the change to Entrepreneurs’ Relief?

Well, the expected freezing of duties on most alcoholic beverages will help in a small way.  As will the much-trailed relief from business rates, but this only represents a small step in the right direction.  Larger, multi-site operators are not going to see the benefit of this relief afforded by the Chancellor.  

Any business seeking to incur significant capital expenditure could benefit from the temporary increase in Annual Investment Allowance from £200,000 to £1m.  Similarly, the announcement of a high street fund to help transform such areas is likely to be of some use, but it is questionable whether it will actually tackle the underlying 'problem' in that consumers have fundamentally changed their shopping habits. This, combined with the further costs headwinds heading the sector’s way, means we are likely to see more casualties on the high street.  

Increases to national minimum wage

The Chancellor announced plans to increase the national living wage. Whilst viewed as a necessary and welcome measure to help lower paid individuals, this represents a further cost to businesses relying on such workforces and is likely to prove a burden that tips some over the edge.

Charlie Barnes, Employment Lawyer at RSM Legal, says, 'the Government is sticking to its commitment to increasing the national living wage to 60 per cent of median earnings by 2020.  Whilst employers are now used to these annual above-inflationary hikes in the national minimum wage, they still must find the budget from somewhere to meet them.  Failing to pay national minimum wage is not an option, what with HMRC’s vigorous approach to enforcement and the brand and reputational damage which can result from non-compliance.  

'The retail and leisure and hospitality sectors will be the hardest hit by the rises due to the prevalence of low paid workers.  The high street is facing a tough economic climate from increased business rates and rents to the shift towards online retailing.  Whilst the Chancellor’s proposed package of business rates relief will provide some comfort, the increase in national living and national minimum wage could lead to more casualties for those unable to cushion it.'

More cost headwinds were hinted at when the Chancellor focussed on single use plastics, something that has attracted the consumer’s attention following the publicity generated by the Blue Planet II.  The Chancellor put a shot across the bows of businesses where single use materials are used, in saying that he will monitor those who are seeking to self-review their use of such materials.  It is clear that our love of coffee will be a particular target for such scrutiny by the Government.  This combined with a reform of the tax on producers or importers of such materials could lead to extra costs for business which they will be under pressure to pass on to the consumer.

In summary, the acceleration of the increase in personal allowance and higher rate threshold, along with the increase in national living wage, should help increase disposable income for spending within the sector.  However, it is arguable that such benefits could be negated by businesses having to increase prices to take account of higher operational costs. At a time when such businesses are already struggling to remain relevant, there will undoubtedly be some that will not be able to cope or adapt.