Spring Budget 2024: Disappointing for Retailers

Although data indicated January saw retail sales up and recover from a slump in December, the recent Spring 2024 UK Budget was anticipated to bring support to the sector. However, it was more notable for what it didn’t do for retailers as opposed to any benefits or help given to the industry.

In the event run-up most focus had been on a re-introduction of VAT-free shopping for overseas visitors. The Government is currently consulting on this measure and that remains the position. That was despite pleas from business leaders to re-introduce it on the basis that it brings more than £11.1bn into the economy (that including the add on spend of hotels, hospitality and similar which is instead lost to EU destinations where the benefit remains). In addition, the Brexit induced impacts of increased red tape and hence costs for selling into the UK’s nearest market still linger, hurting the SMEs far more than those larger businesses and there was no comment on changes to this landscape.

VAT on hospitality income from catering was also not reduced despite a similarly sized campaign on this matter. Given the number of retailers that have introduced these types of concessions into their bricks and mortar operations it was another blow for them and the associated high street. That was added to by the lack of any mention on direct tax benefits for businesses or any movement on business rates with the latter rising in April 2024 well above the inflation forecast for all but the smallest of UK businesses.

This personal tax focussed budget (as they always are ahead of an election) fails in our view to help a sector that desperately needs support. The decrease in National Insurance payments will put some money back into consumers’ pockets but this is unlikely to generate disposable income that retailers will benefit from. In conclusion it looks like the sector needs to wait for a new government before anything begins to get better. Areas we see as being critical to address include:

• making the UK retail offering more attractive to overseas customers whether via a VAT break or other means
• tackling the disparity between business rate hikes and the forecasted rate of inflation
• taking real steps to help high street retailers compete with online offerings
• reviewing whether there is scope for losses incurred by retailers in present years to benefit from them sooner rather than later.

If you would like to speak with any of Crowe's retail team please don’t hesitate to get in touch.