Following a year of unprecedented financial pain brought on by the coronavirus pandemic, retailers lay out what they would like to see in Wednesday’s Budget.

  • Chancellor Rishi Sunak has been cautious ahead of the Budget, saying the need to balance the books is “a sacred duty”
  • Extending business rates relief is a key concern for retailers, but Primark owner ABF’s CFO John Bason is confident that will happen
  • Tesco chief executive Ken Murphy has mooted a 1% online tax, while Dixons Carphone boss Alex Baldock wants a tax on online warehouses

The retail industry has been one of the hardest hit by Covid-19. While retailers of essential goods such as grocers have benefited from sales growth, and certain categories such as homewares and leisure apparel have flown because of housebound customers, many have suffered during lockdowns and in uncertain trading conditions. 

Rishi Sunak Budget

Source: Number 10

Chancellor Rishi Sunak has indicated he is keen to balance the books 

Government schemes such as the business rates holiday and furlough have been warmly welcomed and there is a growing sense of relief that the chancellor will continue those schemes well into the year to give businesses a chance to get back on their feet. 

Sunak has been cautious when discussing plans to repair public finances. At the autumn spending review, he said emergency borrowing had only been possible “because we came into this crisis with strong public finances”.

He maintained: “We have a responsibility, once the economy recovers, to return to a sustainable fiscal position.” He also described the need to balance the books as “a sacred duty” in October. 

However, it has been widely trailed that Sunak will extend vital support lifelines, such as the furlough scheme and business rates relief.

One area that is less certain is what the chancellor will do to support consumers. For one thing, the government’s stamp duty holiday is set to expire on March 31, as is the £20 a week Universal Credit top-up. 

“With our customer base we’ve seen terrible issues with the shambolic rollout of Universal Credit, which is having real cashflow issues” 

Richard Walker, Iceland

Iceland managing director Richard Walker believes extending support to consumers will be just as important for retailers at this budget as other support schemes. 

”With our customer base we’ve seen terrible issues with the shambolic rollout of Universal Credit over the last couple of years with delays in payments, which is having real cashflow issues,” he says.

“To be paid monthly, inclusive of rents, is something that’s very difficult for many people to manage cashflow wise.”

Extending business rates relief

The scale of the business rates burden borne by retailers has long been a source of anger and concern. The issue was already coming to a head pre-Covid as the divide between rates and rents widened. 

Again, Sunak was warmly praised by the industry when he introduced a 12-month business rates holiday last year. 

That holiday is due to expire in April, around the time so-called non-essential retailers are due to reopen stores on the 12th, and many retailers are concerned about the double-whammy effect of slow footfall and eventually having to pay full rates again. 

“I’ve been lobbying the chancellor to suspend business rates for a further 12 months, giving him time then to do a thorough review of what is a ridiculously archaic taxation” 

Theo Paphitis, Theo Paphitis Retail Group 

Scotland’s first minister Nicola Sturgeon recently announced that retail, leisure, hospitality and aviation businesses would pay no business rates for the 2021/22 financial year, and Ryman owner Theo Paphitis hopes to see the same in England. 

”I’ve been lobbying the chancellor to suspend business rates for a further 12 months, giving him time then to do a thorough review of what is a ridiculously archaic taxation,” he says.

”We’ve seen Scotland already come out and suspend it for 12 months, so I’ve got my fingers crossed that something will be there for us,” he says. 

Ikea UK chief executive Peter Jelkeby says: “I think business rates relief has been really appreciated.

“It’s something going forward that we would like to see be more fit for purpose. I think that would be an important part of the learnings we’ve had from the year.”

Primark owner ABF’s chief financial officer John Bason agrees. While Primark traded well when its stores were allowed to open, it suffered £1.1bn in lost sales last year due to store closures.

“I welcome a look at business rates,” he says. “I think the UK government really does understand that business rates as they stand are inequitable.

“It’s an unfair burden on the bricks-and-mortar retailers. It just doesn’t feel right.”

“I think there will be, although there are some debates about it, a well-considered and a much-needed reform. Clearly, the status quo isn’t right”

John Bason, ABF 

Bason is confident the chancellor will extend the relief until autumn at least, but he hopes for a more fundamental review to be undertaken within that period.

“I think there will be, although there are some debates about it, a well-considered and a much-needed reform. Clearly, the status quo isn’t right.”

The long-awaited government review of business rates was due to be published this month but has now been delayed by HMRC until later in the year.

Alongside business rates relief, many retailers hope that the chancellor extends the eviction moratorium for the rest of the year as well. 

“Throughout most of last year, we were able to get rental holidays from landlords,” says the managing director of one fashion retailer.

“But this year, our landlords have gone silent on us. They talk a good game about helping retail, but they aren’t showing that at the moment. Extending the moratorium until the end of this year at least would be hugely welcome.”

A question of tax

Stemming from what bricks-and-mortar, including multichannel, retailers see as an unfair playing field, there have been calls from some for either a blanket online tax or even a warehouse tax to be introduced by the chancellor. 

The issue came to the fore in early February, when a letter spearheaded by new Tesco chief executive Ken Murphy and co-signed by executives from Asda, Morrisons, Waterstones and B&Q owner Kingfisher demanded that the business rates multiplier be “significantly” reduced.

Tesco boss Murphy went one step further, calling for a blanket 1% sales tax to be levied on online retailers to “level the playing field”. 

Dixons Carphone boss Alex Baldock subsequently called for a tax to be levied on online retail warehouses, saying: “In the past decade all the growth in retail has come online… yet rates bills for sheds are proportionately a fraction of those for stores.”

Multichannel fashion giant Next’s boss Lord Wolfson told Radio 4’s Today programme he thought it would be appropriate for the government to look at a “moderate” increase in corporation tax to pay for some of the ongoing support schemes. 

“Businesses have been huge beneficiaries of the action taken by the Treasury. So I think it’s not unreasonable for corporation tax to go up, you know, moderately to pay for something that benefits us all” 

Lord Wolfson, Next 

“I think the first thing all of us in business have to recognise is that, without the quick and incredibly effective action of the chancellor and the Treasury a year ago, a lot of us would have been out of business.

“Businesses have been huge beneficiaries of the action taken by the Treasury. So I think it’s not unreasonable for corporation tax to go up, you know, moderately to pay for something that benefits us all.” 

While Paphitis was hesitant about corporation tax being increased forever, he says it would be appropriate for it to be increased proportionately for a fixed period to bring borrowing down. 

Extension of the furlough scheme

Sunak’s furlough scheme has been credited with staving off mass unemployment. Data from the Office for National Statistics (ONS) showed that as of February 2021 there were still 6.5 million employees on furlough – about 20% of the working population. 

Last year brought a record 180,000 job losses in retail as businesses struggled or collapsed, according to the Centre for Retail Research, and ONS data shows nearly 1 million retail and hospitality employees are still on the scheme. 

“We hope the chancellor keeps some form of the furlough scheme still in place,” says Urban Outfitters global executive director of retail Claire Arksey. “Employers are anxious to see what that looks like.”

Waterstones chief executive James Daunt agrees. “[Sunak] evidently needs to continue with the furlough scheme, he needs to continue with a rates holiday and he needs to continue with a rent moratorium,” he says.

“If he does all of those things, then it’s more likely that more businesses will survive.”

“In other countries, they’ve either been given lots of government support or have been kept open. I can’t think of anywhere else that has left their retailers in quite such an exposed position”

James Daunt, Waterstones

There has been speculation that the chancellor may unveil schemes such as high street shopping vouchers and even lowering the price of alcohol at licensed venues, while increasing it at grocers, to help the shattered hospitality industry. 

While schemes and rumours abound, what retailers seem to want most is for their struggles to be recognised by the government. 

“We were closed from December 19 and are expected to pay 100% of our rent, we continue to employ some people – you’ve got this continual erosion of cash. It’s going to be six months in total with no support,” says Daunt.

“That’s a massive cost. In other countries, they’ve either been given lots of government support or have been kept open. I can’t think of anywhere else that has left their retailers in quite such an exposed position.”

The fashion retailer sums it up simply: “All the sector wants on Wednesday is certainty.”

Through tireless lobbying, it seems many of the key things on retailer’s Budget wishlists will be addressed on Wednesday. However, with the virus still circulating and fundamental business rates reform pushed until the autumn at least, longer-term certainty will be harder to come by.