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UK BUDGET: Retailers criticise 'do nothing' Chancellor

18-Mar-2004

The failure by UK Chancellor Gordon Brown to take any measures to lift some of the administrative burden on the UK food retail sector - or to give it any incentives to stimulate growth or reward it for innovation - has been heavily criticised by the British Retail Consortium, writes Chris Jones.

The British Retail Consortium believes that the Chancellor has delivered a bland Budget. He has missed an opportunity to reduce the rising tide of Government imposed cost of doing business in the UK or deliver value for the taxes that the retail community pays. David Southwell, spokesman for the BRC, which represents the UK's 188,000 retail businesses including those in the food and drink sector, told FoodandDrinkEurope.com that Brown had wasted the opportunity to introduce a number of measures which would stimulate growth in the retail sector.

"Every Budget, we look at measures with specific impact for the retail trade and at those which will help the economy as a whole, and this time it is hard to pick out any measures in either category which are likely to prove beneficial," Southwell said.

 

"Whilst there is virtue in stability, there is no virtue in wasting an opportunity to improve the poor value for taxes retailers receive for their contribution to the Exchequer or to roll back the cost burden on business."

 

Crime is one area in particular where the retail sector had hoped for more support. "Convenience stores are particularly vulnerable to retail crime, given their location, their long opening hours and the large numbers of products they stock which are particularly prone to criminal activity, like alcoholic drinks," Southwell said.

 

"But Brown failed to introduce any concrete measures at all to help retailers combat this problem. Retail crime is not a priority for the police because of their own budget restraints, but the Chancellor also failed to support retailers who are taking their own measures to counter the problem.

 

"The simple measure of introducing tax breaks for companies to offset the cost of installing CCTV or introducing radio tags on certain products to track them more easily would have sent the message that the Chancellor is concerned about the issues of an industry which pays so much into his coffers each year."

 

Rising costs

 

The two biggest cost generators for any retailer are staff and property, and Southwell was disappointed that there were no measures in the Budget to ease the increasing financial burden on the sector.

 

"The recent decision to increase stamp duty [a tax payable to the government] on commercial leases is likely to have a particularly detrimental effect on the retail sector in the UK," he said. "For small and medium-sized companies in particular, the additional cost of stamp duty - and of higher retail rents - is having a major impact on their expansion plans. We were particularly disappointed that the Chancellor was clearly not prepared to reconsider this decision."

 

Nor were there any building allowances for retailers to help shoulder the cost of store refits, a process necessary for them to remain competitive, said Southwell.

 

"And what about tax credits for the retail trade for the major role they play in new product development in the food industry? The Chancellor has given credits to science and technology companies, but the truly world-class innovation in the food industry is completely overlooked."

 

As for staff costs, Southwell said that there had been no major increases in the Budget, but with 11 per cent of the UK workforce employed in the retail sector (some 2.7 million people), the administrative burden on retailers is already extremely onerous.

 

"Retailers are already having to cope with the impact of the rise in the minimum wage to £4.85 - an ill advised rise given the prevailing tough economic conditions -and wage bills have rise substantially under the current government. Over the last 18 months alone, the rate of retail employment has slowed dramatically because of the increasing wage bill - but the Chancellor has done nothing to ease the situation."

 

Given the current strength of the British food retail sector - with leading supermarket groups criticised increasingly for increasing their margins at the expense of both shoppers and suppliers, all this criticism might seem a little like sour grapes. But Southwell disagreed.

 

"Take a company like Tesco, one of the biggest UK companies and the leading food retail group. Its contribution to the Treasury every year is huge, and the company could justifiably ask what it receives in return for all the money it adds to the government's coffers. All the retail sector wants is a level playing field - to be treated more fairly in light of the amount of tax that it pays."So what are the long term threats from this persistent lack of support for the retail trade? "British food retailers are increasingly looking to international markets for growth," said Southwell, "and while this is mainly to do with the ultra-competitive nature of the maturing market, the simple fact is that the Chancellor's Budget has done nothing to make the situation any easier. The cost of doing business in the UK remains very high, and companies will inevitably start to look elsewhere for expansion."

 

A move which will ultimately lead to lower tax revenues for the UK as more and more businesses move abroad but one which the Chancellor currently seems happy to ignore.