Spring Budget 2024: Food and retail sectors react

06 March 2024, 16:45 PM
  • What do the Chancellor’s latest announcements mean for food, retail and farming businesses? Speciality Food finds out
Spring Budget 2024: Food and retail sectors react

Chancellor Jeremy Hunt set out the government’s 2024 Budget on 6th March, including a cut to National Insurance and a freeze of the alcohol duty, but no change to the planned hike in business rates

The Office for Budget Responsibility forecast that inflation will fall below 2% in the coming months. “This will provide some relief to small, independent food businesses who have been particularly struggling with rising costs,” said Emma Jones, founder of small business support platform and membership community Enterprise Nation.

However, she believes the Budget was a missed opportunity. “This was a budget for a general election, not for small business growth.” Here’s how others in the food, farming, retail and hospitality sectors responded to the headline figures.

Small businesses still face serious issues

Two positive announcements for small businesses were the decisions to raise the threshold at which they must register to pay VAT from £85,000 to £90,000 from April and to cut self-employed National Insurance Contributions.

Tina McKenzie, policy chair at the Federation of Small Businesses (FSB), welcomed these and a package of other measures for small business owners, including commitments to make progress on the HMRC administrative burden and on the national roll-out of the Business Energy Advice Service, as well as extending the Recovery Loan Scheme under a new name: the Growth Guarantee Scheme. 

“That said, many of those running businesses face serious challenges – not least through rapid hikes in labour and input costs – and many will have understandably hoped that there would be more measures announced today that would help ease the tough decisions small employers are having to make day-in day-out to keep their businesses going,” Tina said.

In particular, Tina said the Employment Allowance should have been uprated to keep pace with the National Living Wage, and more help with rising costs would have been welcome.

Enterprise Nation’s Emma added that the new British ISA is an “innovative step that could boost investment in UK businesses and assets” and the 2% cut in National Insurance announced in April would put more money back into the pockets of working people and the self-employed. 

“But more direct action is needed to tackle the key issues holding back small businesses,” she continued. “Late payment remains a major crisis, with many businesses struggling with poor cash flow as a result of being paid late.

“Founders have unrealised potential to sell, export, hire and innovate, but they need a rallying cry to inspire them. Today’s Budget did not provide that,” Emma said.

Chancellor doesn’t share ambition’ of retail sector

Helen Dickinson, chief executive of the British Retail Consortium (BRC), agreed that the retail sector, which employs three million people, is making strides towards a more positive future, but she added: “It seems the Chancellor does not share in our ambition, and today’s Budget will do nothing to deliver a better future for retailers and their customers.”

The BRC had called for the government to “fix the problem with business rates” as they had set out to do in their election manifesto. Now, Helen said the lack of action will cost the retail industry £470m extra every year. “How can a whopping 6.7% tax rise in April be justified, when the Chancellor himself is saying inflation is forecast to be nearer 2%.”

What’s more, while the Chancellor said burglaries and violent crime had halved in the retail sector, Helen said this “simply doesn’t tally with the experience of thousands of those working in retail. The number of incidents of violence and abuse rose to 1,300 per day in 2022/23 from 870 the year before, according to the BRC.

“The Protection of Workers Act in Scotland already provides additional protection to retail workers, so why should our hardworking colleagues south of the border be offered less protection?” Helen asked.

And with retailers facing billions in additional costs as a result of new government policies – from higher business rates to the deposit return scheme – Helen said this will feed into prices. “Government must consider the cumulative impact of introducing all these policies, and more, in such a short space of time, or else risk a second wave of inflation impacting households.”

Like retailers, restaurants, cafes and other hospitality businesses are dealing with high costs, inflation and the cost-of-living crisis, and Kate Nicholls, chief executive of UKHospitality, agrees that the increases to business rates in April will only contribute to inflation, as businesses will be forced to pass these costs on to consumers. Kate said the government needs to take a different approach and “bear down on the never-ending rising costs” that are forcing businesses to shut.

“The National Insurance cut earlier this year was intended to boost disposable income to generate growth and didn’t have an impact. A different result can’t be expected this time around,” she said.

‘Our country needs a strong food and drink sector’

Food and Drink Federation (FDF) CEO Karen Betts agreed that the difficult environment is having an impact on food producers too, with the costs of recent turbulence being “illustrated in stark terms by a steep fall in investment in food and drink manufacturing, which declined by a third last year compared to 2019. 

“Our country needs a strong food and drink sector – which underpins our food security, as well as hundreds of thousands of jobs and forward-looking science and innovation. For this we need joined-up, constructive government policies to shore up our strength and to create the conditions for investment. This was in short supply in this Budget.”

Instead, Karen said, the sector is being held back by a “muddle of poor regulation”, such as ‘Not for EU’ labelling, which she predicts “will have a chilling effect on investment and exports while tying UK food labelling once again to EU rules.” 

The NFU argued that for farmers, as the bedrock of the UK’s biggest manufacturing sector, the budget didn’t go far enough. NFU president Tom Bradshaw said: “Where some of the headline announcements, such as an extension to agricultural property relief (APR) and a reduction of National Insurance for the self-employed, could offer some benefits to agricultural businesses, the chancellor has missed an opportunity to deliver resilience for food producers.

“We welcome the government backing the NFU’s call for the extension of APR to land in Environmental Land Management (ELM) schemes as it will remove a barrier of entry for a number of farm businesses and give farmers more choice about how to use their land. But the extension of this beyond ELMs may have an adverse impact on food production and farm tenancies and we will work with Treasury to assess those implications.

“Agricultural businesses are facing a challenging economic backdrop, with input costs at persistently high levels and at least a 50% reduction in direct farm payment support due this year. The announcement on the abolition of the Furnished Housing Letting regime is a significant concern as it’s an important source of diversification for farm businesses which underpins resilience. We will be looking to engage further with Treasury on this announcement.”

Drinks sector welcomes freeze to alcohol duty

In another spot of good news, the chancellor chose to freeze the alcohol duty until February 2025, and Miles Beale, chief executive of the Wine and Spirit Trade Association (WSTA), said the sector was “relieved”.

“Six months ago, alcohol duty was subjected to the largest increase in almost 50 years. Those tax increases fuelled inflation and had a negative impact on sales, which in turn has seen Treasury lose around £600 million in alcohol revenue. We are pleased that government has now recognised that duty hikes are bad for businesses, bad for consumers and bad for the exchequer.” He added that the pattern for raising alcohol duty at both the Spring Budget and Autumn Statement is “very unsettling” for the industry, and a once-a-year announcement would give businesses more certainty.

“Freezing, or even better cutting, alcohol duty supports British businesses like mine and boosts revenue,” added Karl Mason, founder of Masons of Yorkshire Gin. “I’d encourage any Chancellor to go even further next time.”

However, wine businesses will still be faced with “complex and costly changes” to the way wine is taxed from 1st February, 2025.

“The changes to taxing wine have been described as ‘un-administrable’ and ‘sheer lunacy’ by our members,” the WSTA’s Mike said, adding that scrapping the easement for wine duty will see price increases for 75% of red wines sold in UK. “It’s going to be a very costly mistake,” he added.

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