The Chancellor delivered his Autumn budget and many of us are asking….. how has the Chancellor really helped my small retail shop? Newspaper articles, the news and social media articles all tell us that Mr Hammond has delivered one of the most small-business-friendly budgets for a long time, and has delivered a budget that kicks off a government strategy to rescue the high street.
In his 90 minute budget speech, Philip Hammond said: ‘Embedded in the fabric of our great cities, towns, and villages, the high street lies at the heart of many communities.
‘And it is under pressure as never before as Britain adopts online shopping with greater alacrity than any other large economy.
‘So, if Britain’s High Streets are to remain at the centre of our community life they will need to adapt. Today we support them to do so.’
But really, who wants to unpick exactly how supportive each sector of his budget really is for small independent businesses? Never fear, here is a simple, jargon free summary of how small retailers will benefit from this 2018 Winter Budget.
So let’s summarise what financial help he has promised us:
For bricks and mortar stores, he has listened to the biggest gripe which has been over business rates. Rates on commercial properties – including offices, shops, salons etc are based on the open market rental value, then multiplied by a “multiplier rate” which is set by the government. This has been set at 48p for a small business (ie if your rateable value is less than £51,000 per year). So let’s say Julie has a small high street shop with a rateable value of £10,000 per year. We take this £10,000 and multiply this by 0.48 = £4,800. This is her annual business rate to pay (this is IN ADDITION to rent to the landlord, amenities, heating, lighting, braodband, staff, stock!!)
The argument has been that bricks & mortar businesses are immediately at a disadvantage to online small retailers (who often work from home / garage) and have no business rates to pay.
So the change in the budget now means that the 48p multiplier, will now reduce to around 32p, saving Julie £1,600 each year.
Taxing the digital giants…
This is his way of evening out tax…. we have all read that retail giants such as Amazon and Starbucks have managed to avoid paying large tax bills to the UK government, and in particular Amazon is usually taking the blame for the demise in the high street (I don’t actually believe it is by the way… but that’s for another blog post!
The tax will apply to digital businesses – including online retailers – with a turnover of over £500 million. Facebook & google would also come under this heading too. The tax would scupper their ability to sell products at a low price, cutting out the smaller retailer as they simply cannot compete on price.
The reality is that even with a hefty tax bill, Amazon won’t increase it’s prices. They will simply squeeze their suppliers a little tighter. It’s also interesting to read that financial experts believe that this tax will never come into fruition. It was due to be implemented in 2020 but with Brexit and an announcement expected soon from the OECD, who has promised to come up with its own plans to tax the digital economy, the tax from Mr Hammond will disappear into oblivion.
The BBC quoted “That’s not to say that the rest of the world isn’t serious about figuring out how to tax technology companies – they are, and their proposals may be more aggressive than Philip Hammond’s.
But it’s unlikely that the measures in today’s Budget are enough for him to be considered as the saviour of the High Street.”
Let’s talk money…
We all strive to grow and develop our businesses to a point where we can employ staff… whether that be an apprentice, a Saturday worker or a store manager.
Yeah if we get to this point, but with each budget comes a rise in the National living wage – increasing by 4.9% from £7.83 to £8.21 per hour from April 2019
But if we do employ an apprentice the contribution costs of a small business is now halved from 10% to 5%
And if we do pay ourselves, we can now earn £12,500 before we pay income tax (was £11,850), and if we pay ourselves generously, we can now earn £50,000 before we start paying tax at 40% (was £46,350)
Will this budget really save the High Street?
After one of the worst years fro retail, we are really looking for a longer lifeline that a saving of a few thousand pounds each year on our business rates (well for two years)
With Toys R Us, Poundworld and Maplin closing for good, House of Fraser partly being rescued and New Look, Debenhams, M&S, Sainsbury’s, Morrison’s, Shop Direct, Carphone Warehouse and Homebase all closing shops, warehouses and cutting jobs, it doesn’t make good reading for Britain’s retail economy.
We also have Mothercare & Carpetright filing for a company voluntary arrangements (CVAs) to close outlets and lay off staff. A CVA is a form of insolvency that enables a business to renegotiate deals with suppliers, landlords and creditors.
So it seems all levels of the retail playing field are struggling, it’s a challenge whether you are a retail giant, a premium brand, an independent small shop or a discounter…. and with only a reduction in business rates to financially help the small business this budget isn’t the magic wand needed to save the high street. Without doubt it’s a step in the right direction, but many, many more steps are needed to move the consumer back into the High Street to spend their money.
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