John Chapman, managing director of The Oxford Wine Company, unpicks the Labour government’s first Budget and assesses the impact on indie retailers.
Wow, what a Budget, with very little to like from a UK independent wine business perspective. As a bricks and mortar SME, the Budget has come at us with several areas of increased costs. Rather than supporting the working person and thriving small businesses, this will no doubt be the nail in the coffin that closes a percentage down for good.
The biggest hit must be the reduction in business rate relief, which favours wine businesses operating online with virtually no staff. Rather than encouraging shops in our towns and communities, this is a large penalty which will cost us dearly. Changing the rate and threshold of National Insurance increases the wage bill and discourages employers from hiring too many staff, which, with the new minimum wage hike, would probably be too expensive anyway.
That was my initial reaction and similar to that of many businesses which have been hit with these extra cost burdens. But wallowing in self-pity does not solve the situation: how much will this cost us and what can we do about it?
Change in rate relief. This is a tricky one as it is essentially a tax on providing an in-person service as opposed to online. With attractive and accessible premises in our towns, we are charged higher rents and thus higher rates than a warehouse unit tucked away on some industrial park. The cost to us will be circa £50k. There is no direct way of mitigating this change, so the solution is that prices will have to go up.
Increase in percentage and threshold for NI employer payments. By the very nature of an in-person retail business, staffing costs are high. All indies pride themselves on individual service and to reduce this is not an option. How to combat the increase? Potentially reduce opening hours to reduce staff wages? Close an outlet to focus on one or two sites? Automate or outsource more admin tasks to free up customer-facing time? Honestly, I think there is no easy path here as we wouldn’t want to lose the very USP that has kept us busy for more than three decades. Cost to us: circa £30k. The only answer: put prices up
Increase in minimum wage. This is a more subtle problem. It does not impact us directly as we pay above this level, but the unseen impact is problematic as the wages of lesser-skilled personnel in other sectors creep closer to those we pay our staff. Couple it with the squeeze on our profits restricting wage rises and the result is the loss of great people from our industry to better-paying roles in the finance or insurance sectors. Solution: find the money to be able to increase wages by putting prices up.
Reduction in easement on new duty bands. A complete body blow to the UK industry as this achieves very little apart from more administration and cost, resulting in higher-priced wine. Some cite a positive outcome in reducing the alcohol consumption of the UK public. But, in reality, a quality product such as proper wine will not compromise itself for price, and the consumers are grown-ups who can make responsible decisions on their own. Solution: put prices up
Increase in wine tax in line with the RPI. Simple answer: prices must go up.
So, we will increase pricing and maintain our quality, in-person retail sites. I believe the wine-drinking public will still want our advice and guidance. To my knowledge, no AI bot can yet replace the civility of discussing the merits of which St-Joseph would pair best with the venison stew you have planned for tonight’s dinner.
