Spring Budget: What the food sector wants to see announced

Following the government’s reveal of its four-stage lockdown exit plan, the Spring Budget on 3rd March is the next event that the food and drink sector will be paying close attention to.

In fact, with a return to ‘business as usual’ seeming “an awful long way off,” according to Food and Drink Federation (FDF) chief executive Ian Wright, “it is only correct that the chancellor outlines significant extensions to the furlough and credit insurance schemes as part of his Budget announcement next week”.

As an important sector in Britain’s economy, the food and drink industry will play a key role in the country’s economic recovery. “Now is the time for government to provide additional support to ensure those businesses most at risk can play their part in putting the country back on its feet,” he continued.

We’ve rounded up a list of the policies that the food and drink sector is hoping to see announced next week.

Food and drink manufacturers

As well as calling for extensions to the furlough and credit insurance schemes, the FDF has called for more support across trade, supply chain resilience, carbon emissions and innovation.

“The UK food and drink manufacturing sector has been remarkably resilient over the last year in the face of the enormous pressures of the Covid-19 pandemic. We continue to be extremely proud of the sector’s response in feeding the nation. However, food and drink manufacturing did not go unscathed and our members are now being put to the test, as the sector also navigates very turbulent waters caused by the sharp economic downturn, the very significant disruption from the end of the EU exit transition period and Covid-19 itself,” wrote FDF chief executive Ian Wright in a letter to the chancellor.

The points made in the FDF’s budget submission included: creating a specialist Food and Drink Export Council to drive UK-wide collaboration post-Brexit, launching a Food and Drink E-Commerce Programme to take advantage of new opportunities, financial support to offset unnecessary costs of Brexit, incentivising innovation, creating a dedicated Decarbonisation Fund for the food and drink sector, and reconsidering the timing of the plastic packaging tax.

Dr. Samuel West, co-founder of NKD Living, which supplies food manufacturers, retail wholesalers and consumers with plant-based sugar alternatives, said Covid-19 and Brexit have “added a new layer of difficulties for the food industry that we are hopeful will be resolved.”

“We are hoping that the announcement will be conducive to extending business rates relief for a further six months, this will really give businesses and the people within them the chance and energy to bounce back,” he told Speciality Food.

Retailers

Despite food retailers being relatively resilient during the pandemic, in comparison with non-essential retailers, the sector has still been challenged by Covid-19. “One of the few silver linings of the pandemic is that it has highlighted the sectors most at risk and the government needs to look at legislation to protect these industries i.e., the disappearing retail high street, and offer help to these sectors in order to make competition between e-commerce and the high-street a more level playing field,” NKD Living’s Samuel said.

Retailers have also made a call for the extension of business rates relief. The Federation of Small Businesses (FSB) urged the chancellor to make the “most ambitious Budget in modern history” to reverse the damage of Covid.

In addition to extending business rates exemptions to 2022 and permanently bringing the rateable value ceiling for small business rates relief up to £25,000, the FSB called on the chancellor to: introduce a retention bonus for employers who bring back staff from furlough, build on Pay As You Grow bounce back loan scheme to “move the UK’s small business community out from under an unstable debt mountain” and to provide a roadmap to reopening that encompasses measures to facilitate digital adoption, investment and upskilling in small firms.

“The chancellor must deliver on the Prime Minister’s “whatever it takes” pledge at next week’s Budget,” said FSB national chair Mike Cherry following the lockdown exit plan announcement. “On one side of the coin we have continued restrictions – on the other, we need corresponding business support.

“Whatever it takes means bringing those overlooked by current support measures into the fold, including suppliers, directors and the newly self-employed. Upwards of a million small business owners and sole traders are currently receiving no direct help whatsoever,” he said.

With 2020 marking the worst year on record for retail sales, the British Retail Consortium (BRC) also called for action in the short-term on rates, rents and grants, including extending business rates relief, extending the moratorium on debt enforcement and reversing EU state aid limits on lockdown grants. “The investment we provide to retailers now, will be repaid many times over through more jobs and greater tax revenues in the future,” said BRC chief executive Helen Dickinson.

Wholesalers and distributors

The FSB also calls for support of ‘hidden heroes’ within our supply chains – something which food wholesalers and distributors have been pushing for ever since the pandemic hit.

The Federation of Wholesale Distributors (FWD) this month launched a petition urging the government to grant food and drink wholesalers with bespoke financial support. With previous calls for sector-specific support “ignored”, the FWD said the need for financial aid is getting greater.

“Having had no government support through nearly a year of lockdowns and restrictions, and having traded at a loss all that time to supply hospitals, care homes and schools, these wholesalers have no money left and some are on the brink of collapse,” said FWD chief executive James Bielby. “There’s no way back for hospitality without its wholesalers, and there’s no hospitality wholesalers without immediate support.”

Fine food distributor RH Amar’s chairman Henry Amar told Speciality Food that the chancellor will also have a decision to make on 3rd March over whether to raise taxes to start addressing the £250bn deficit, or defer taxes rises to support people and jobs until the economy recovers in the hopes of a consumer-led recovery.

“Probably the chancellor will go for a mixture of the two strategies,” he said. “On taxation he is to some extent bound by the Conservative manifesto pledge not to increase VAT, National Insurance Contributions or income tax (though he may cut back reliefs or freeze tax allowances). The easiest gain will be to increase Corporation Tax from 19% up to say 24%, which would still leave Britain competitive with other countries.

“The chancellor may well choose to protect hospitality and tourism by maintaining the 5% VAT rate for up to a year,” Henry continued. “He may also raise capital gains tax, perhaps to the same levels as income tax, and adjust inheritance tax rules, though these moves will not please business owners and entrepreneurs. The much discussed wealth tax will similarly be unpopular with Conservative voters.

“There may well be new “green” taxes to protect the environment, and the chancellor may well announce a consultation regarding online sales tax.”

The Spring Budget on 3rd March could provide food and drink businesses with the necessary tools to overcome damage caused by Covid, but only time will tell whether the chancellor’s announcement will favour the sector.