Retailers & manufacturers will be wary of ‘Devil’s bargain’ mini-budget


Chancellor Kwasi Kwarteng’s ‘slasher movie’ mini-budget has taken a chainsaw to planned tax increases, EU environmental and regulatory rules and limits to bankers’ bonuses.  Many of the announcements will be welcomed by retailers, manufacturers and their logistics partners, but they come at a high price.

Of course, businesses will welcome the new Energy Relief Scheme that will discount gas and electricity prices. Energy costs have been top of manufacturers’ and retailers’ concerns for some months. However, the temporary six-month scheme won’t be of much help to companies finalising their plans for 2023. A two-year deal, equivalent to that given to domestic customers, would be vastly more constructive and encourage businesses’ investment plans.

The cancelling of the planned corporation tax increase and confirmation that the Annual Investment Allowance will be made permanent is good news for many organisations. However, other key new measures have a dark side for all those manufacturers, retailers and delivery companies which have been diligently reducing their carbon footprint and greening their operations in recent years.

 Investment Zones planning ‘liberalisation’

For example, the creation of Investment Zones looks to be a Devil’s bargain. These new business-friendly areas will give tax incentives and 100% business rates relief on newly occupied premises. That’s very tempting for manufacturers and logistics companies, but the zones rely on what the Chancellor’s new Growth Plan calls “planning liberalisation”.  The Government states: “Planning applications will be streamlined and we will work with sites to understand what specific measures are needed to unlock growth, including disapplying legacy EU red tape where appropriate.”

The UK’s planning rules, often constructed around EU regulations, have grown up over time to strike a balance between the needs of businesses and the environment. Businesses that have sunk money into ensuring their operations are far greener than they were a decade ago, for example by switching to electric vehicles and embracing recycling, should be wary of this slashing of green regulations. Such developments may also face a considerable public backlash.

Infrastructure ‘environmental burden reduction’

There was considerable focus in Chancellor Kwarteng’s statement on infrastructure development, which is excellent news for businesses and their transport partners keen to end logistics bottlenecks and ensure swift deliveries. The new plan lists rail and road projects that will help ensure Britain keeps on the move.

However, once again, these plans come at a potentially heavy price to the environment. The Growth Plan states that new legislation will need to be brought forward to address planning “barriers” by reducing “unnecessary burdens to speed up the delivery of much-needed infrastructure”.

‘The measures will include, in the Government’s words:

  • reducing the burden of environmental assessments
  • reducing bureaucracy in the consultation process
  • reforming habitats and species regulations
  • increasing flexibility to make changes to a DCO [Development Consent Order] once it has been submitted.

For any business that is conscientious about its environmental impact, this is a concerning list of measures that will leave many greener businesses uneasy about the true cost of these plans.

Retailers’ regrets

This mini-budget was big on tax cuts, but small on targeted help for UK retailers. A genuine price cap on energy costs to ensure bills don’t rise by more than an agreed percent over last year would be far more welcome than the uncertainty surrounding a six-month cap on the price per kilowatt hour.

Retailers had also been hoping for more news on business rates and a cut in VAT. Business rates were notable by their absence from the new Growth Plan, except for the controversial Investment Zones’ 100% relief. That’s of no help to High Street retailers.

Similarly, there was no news about a VAT cut. Many analysts had predicted a reduction in VAT from 20% to 15%, but that didn’t happen.

However, the plan does include the return of VAT-free shopping for overseas visitors. The Government says that this will provide a boost to the High Street and create jobs in the retail and tourism sectors. Once more though, the devil lurks in the detail. The move will necessitate the introduction of a new digital VAT-free shopping scheme. The Government says: “A consultation will gather views on the approach and design of the scheme, to be delivered as soon as possible.” Rather than ending faff and red tape, this sounds like a potential source of new expense and bureaucracy for smaller retailers.

The Chancellor’s mini-budget delivers some much-needed help for British businesses, but it’s a double-edged sword. The price of these reforms, both in terms of costly damage to the environment and the dent in the national coffers they will create, could mean businesses pay a high price for short-term relief.

For further information on the plight of retail, ParcelHero’s influential report “2030: Death of the High Street” has been discussed in Parliament. It reveals that, unless retailers develop an omnichannel approach, embracing both online and physical store sales, the High Street as we know it will reach a dead-end by 2030. Read the full report at: