Budget 2021: What does it mean for retail?
04 March 2021
Many in the retail sector will welcome the extension of key business funding schemes announced by the Chancellor today. These measures including further business rates relief, restart grants and loans, and an extension to the furlough scheme provide some targeted support to many struggling businesses across the country. A key part of driving forward the UK’s economic recovery is likely to come from unlocking consumer spending. To enable this, the retail sector needs to reopen successfully and quickly and the government’s continued support will be vital to making this happen.
The three-month extension to business rates announced by Chancellor should provide essential funding as businesses start to reopen. Beyond 1 April, relief looks set to be capped at a fraction of full liabilities. Accordingly, whilst these measures should avoid the long trailed ‘cliff edge’, without further funding, it is likely that many retailers will continue to struggle to make ends meet. It is critical that the ongoing business rates review delivers on its promise of reform and to reduce the burden on high street retail as the current outdated system has already contributed to store closures, job losses and some business failures.
Extension to COVID-19 relief measures
The proposed Restart Grants and Recovery Loan scheme should provide both a vital injection of funding and play an important role in addressing the cash flow challenges that many retailers will face as they begin to reopen. However, further clarity is urgently needed on the application of EU state aid rules as unchecked these could preclude access by some larger companies to significant vital support.
The further extension of the furlough scheme will also be welcomed and should provide many retailers with a much-needed safety net and hopefully prevent further unnecessary job losses. Similarly, the enhancements to the apprenticeship schemes should provide additional incentives for retailers to take on new apprentices.
The Chancellor provided his rationale for the need to increase taxation as a first step along the journey to restore public finances. Many commentators forecast an increase to corporation tax and it is generally accepted to be one of the more equitable measures to raise tax revenue. However, the increase in rate to 25% for large businesses from April 2023 was higher than expected. The Chancellor could also have used this opportunity to link increases in corporation tax to reform of business rates perhaps by permitting a full offset of the business rates liability incurred on high street stores against the increased corporate tax liability. Such an announcement could have brought net tax liabilities down to a more sustainable level and provided further support to the struggling sector.
The temporary extension to corporate loss reliefs will also be welcomed but with corporate tax rates for larger businesses rising to 25% from April 2023 it remains to be seen how many will take advantage of the improved carry back provisions.
With the market penetration of online sales rising faster than ever due to the pandemic, it is vital for retailers to trade effectively through the digital channels their customers are now using. This transformation requires investment in new teams and technology and a refresh of strategic priorities to ensure that the digital proposition is commercially sound. The proposed 'super-deduction' albeit for a limited window of 2 years should provide a valuable and welcome boost for investment in digital innovation.
VIEW OUR BUDGET HUB