As the cost of living continues to rise, headlines for chancellor Rishi Sunak’s 2022 Spring Statement will likely centre around the 5p per litre reduction in fuel duty. And while that will ease some supply chain pressures, there are other gains and losses for drinks retailers and suppliers.
The Association of Convenience Stores (ACS) called Sunak’s statement a “temperate package of support measures to help businesses”, including an increase in the Employment Allowance to £5,000 from next month and business rates exemptions for green investment being brought forward to next month (it was previously scheduled for 2023).
The ACS said this is coupled with previously announced measures such as the 50% business rates discount in 2022-23 for retail and hospitality businesses, and a freeze in the business rates multiplier in 2022-23.
“We welcome the Government’s focus on supporting energy efficient investment with a zero VAT rate,” said ACS chief executive James Lowman. “The UK’s post-Covid economic recovery and the objective of levelling up can only possibly be met by encouraging private sector investment through fiscal incentives and creating the right regulatory environment for businesses, wherever they trade.
“Support for members including the Employment Allowance increase and the previously announced 50% reduction in business rates will help, but both of these measures only give limited support to businesses operating a number of convenience stores who can only claim up to £110,000 in business rates relief, as well as only being able to claim the Employment Allowance for the business as a whole, not for individual stores.”
The fuel duty cut will come in from 6pm tonight (Wednesday), and from April, the employee National Insurance threshold will rise by £3,000 to bring it in line with the income tax threshold. The chancellor also announced a longer-term plan to cut the basic rate of income tax to 19% (currently 20%) from April 2024.
“Our colleagues will be pleased to see the threshold at which they start paying National Insurance Contributions go up, so now many will not pay them at all,” continued Lowman. “Mirroring this measure for employer NICs would have been a game-changing decision that would have helped thousands of small shops to counter high inflation and rocketing energy costs. Unfortunately, most local shops are facing a cost crunch that some may not be able to navigate.”
Meanwhile, the British Independent Retailers Association (BIRA) called the statement “underwhelming”.
BIRA CEO Andrew Goodacre said: “The Spring Statement is underwhelming for indie retailers with limited help on rising costs to business. Whilst we support cuts in fuel duty and an increase in NI allowance, this is nowhere near enough to offset 300% increases in energy, 100% increase in rates and double digit increases in the cost of employment. The 1p cut in income tax is a classic diversionary tactic designed to hide a statement which is short on support for business.
“Increases in product costs are easier to pass on to consumer, but these rising overhead costs are not, which ultimately means a very difficult year for small retailers,” he added.
Elsewhere, Paul Davies, CEO at Carlsberg Marston’s Brewing Company, expressed disappointment that the Government decided not to extend the 12.5% rate of VAT, which was granted to hospitality businesses during the pandemic.
“Pubs and breweries play a vital social, cultural and economic role in Britain and should not be taken for granted. This was an opportunity for the chancellor to do more to ensure a sustainable recovery for the beer and pub sectors,” said Davies. “With rising energy costs, the burden on the brewing and hospitality sectors has only grown since the pandemic. The unfair tax burden on pubs and brewers needs addressing and alcohol duty reforms need to be brought forward alongside a permanent reduction to VAT rates.
“This would not only support the creation of more connected and vibrant communities, but also encourage local investment and employment. These are essential steps if our rich pub and brewing heritage is to truly thrive.”