UK Chancellor Rachel Reeves has unveiled her latest budget — or the Spring Statement as it’s officially known — and while she stuck to earlier promises not to increase taxes on working people, there was little good news to be had.
For a start, it looks like the economy will remain sluggish and that’s likely to depressed consumer spending. Reeves said this year’s growth estimate for the UK economy has been halved to 1% by the Office for Budget Responsibility (OBR).
And while earlier news on Wednesday about inflation was encouraging, it remains above what the OBR had predicted back in the autumn, although Reeves said it should be on target to reach the desired 2% by 2027. That’s down from a peak of 11% that it reached under the last government.
Much of the heavy lifting in terms of big announcements affecting fashion and retail was done in the Autumn Budget so there were few surprises this time. There was also little said about issues that directly affect the fashion and retail sectors. There was no mention of that big bugbear for the industry, business rates, nor of any intention to restore tax-free shopping for tourists.
The Autumn Budget had said small retail businesses will receive a 40% relief on business rates with the current 75% discount expiring next month.
The Chancellor clearly has little wiggle room and re-emphasised that “the global economy has become more uncertain”. This has impacted the UK economy but she said that the country’s “fiscal rules are non-negotiable. They are the embodiment of this government’s unwavering commitment to bring stability to our economy”. That contrasts with some other countries, such as Germany for instance, where certain rules have been torn up in the current circumstances.
Reeves did announce “increasing capital spending by an average of £2 billion per year compared to the Autumn to drive growth in our economy and deliver in full our vital commitments on defence” but said “overall, day-to-day spending will be reduced by £6.1 billion by 2029-30 and it will now grow by an average of 1.2% a year above inflation compared to 1.3% in the Autumn”.
There are cuts being made to welfare spending that the OBR said will save £4.8 billion and that will affect the spending power of a large number of people in lower income groups.
Importantly though, despite the general gloom, Reeves added: “I am pleased that the OBR confirm today that Real Household Disposable Income will now grow this year at almost twice the rate expected in the autumn. And living standards will rise twice as fast this parliament compared to the last.”
And the industry reaction? Helen Dickinson, chief executive of the British Retail Consortium, repeated her concerns about tax-raising policies that were announced back in the autumn and also said: “We welcome the Chancellor’s commitment to ‘drive growth in the economy’ and the retail industry is keen to play its part in this mission. As the Chancellor aims to drive down the number of those who are ‘economically inactive’, there is a need for better routes back into work for those that want or need it after a period of inactivity. The retail industry provides a perfect solution. It is filled with people joining and returning to the workforce. It offers local, flexible jobs, often requiring few qualifications, and part-time jobs that allow people to find their feet, work as much or as little as they are able, and balance work with other important life commitments.
“But the costs from the Budget, and uncertainty about how the Employment Rights Bill and new business rates policy will be implemented, mean it will be much harder for retailers to keep creating these kinds of jobs. So the government should avoid unintended consequences and provide clarity about the implementation of these policies as soon as possible.”
And Dee Corsi, head of the New west End Company, added: “Today’s Spring Statement underscores the harsh reality; that the UK’s economic outlook remains challenging and the support many businesses urgently need is still missing. While we welcome government action to support growth through initiatives like the recent Planning and Infrastructure Bill, for businesses on flagship high streets like those we represent in the West End, there’s an urgent need for more holistic policies to reduce the burdens they face.
“Key to this is the looming hike in business rates, which is a major barrier to the government’s growth agenda, threatening to hit retail, hospitality, and leisure businesses hardest, with potentially devastating consequences. Just as important is the continued absence of tax-free shopping, which cost West End businesses £640m last year, hampering the UK’s global competitiveness and stalling any growth potential.
“We urge the Government to reconsider their proposed reforms [in order] to protect businesses on flagship UK high streets, attract inward investment, and support national and local growth.”
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