UK Head of Retail at KPMG, Paul Martin comments on announcements made by the Chancellor in his Budget
UK Head of Retail at KPMG, Paul Martin comments on announcements made by the Chancellor
Commenting on announcements made by the Chancellor in his Budget, Paul Martin, UK Head of Retail at KPMG said:
‘’Measures announced today by the Chancellor recognise the devastating impact that the pandemic has had on the High Street and go some way to supporting retailers through the short-term challenges to come. "
‘’Extension to Covid support packages such as business rates relief and the furlough scheme through the summer will be welcomed, as will access to “restart grants” and the recovery loan scheme which will provide some temporary relief as retailers look to get back on their feet. Small and medium retailers may tread with caution when applying for loans – which may be necessary now but must be paid back at some stage in the future. Meanwhile large retailers are facing a higher corporation tax rate from 2023 – which will cut deeper into already rising costs and tight margins."
‘It was disappointing not to hear the Chancellor announce any big consumer spending initiatives to help the high street out more, as we have seen other countries like China use to get their economy back on its feet. Encouraging both consumers and tourists to get out and spend from 12th April will be vital if we are to keep our high streets open."
‘’It’s unsurprising that there were no announcements today on an e-commerce sales tax which will require well thought out assessment given the issue is not straightforward. The pandemic has shone a light on some deep seated issues impacting the retail sector and the question of how best to design a new system of taxation and level the playing field in this diverse and fast moving sector is one that requires detailed analysis from the Government. While there is a broader ambition within the Treasury to ‘balance the books’, adding new taxes won’t necessarily resolve the longer-term challenges faced by the industry and a more holistic package to support the retail sector is required following a really challenging year."
Rethinking business rates
‘’Continuing the business rates holiday until June and then reducing payments by up to two-thirds through to April 2021 will give hard hit retailers some breathing space to build their businesses back. The current business rates system has been in operation for decades and has failed to keep up with the pace of change that retailers have faced over the last 20 years. For some, business rates account for up to 50% of retailers’ property costs which is well above those in other sectors, so reform is required in order to support recovery on the high street. Retailers will be disappointed with the delay in the review given the incredibly challenging year they have just been through, but it’s important to get any reform right. The challenge will be how to reform a tax system, one that directly links rates to property value, in a world where high street property isn’t as essential to sectors, including retail, as it once was."
“Alongside addressing the business rates topic there is a broader retailer versus property owner agenda that needs resolving. The aim has to be for retailers and landlords to work more closely together during this difficult time, with changes such as the introduction of turnover-based rents now becoming more commonplace. However, large numbers of rent payments are still not being made, and without a change to the current system, the knock-on effect will not only be retailers failing, but also more landlords not being able to collect rent and therefore increasingly failing to keep up with their financial obligations. This will have much broader term implications for the overall economy.’’
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