Consumer confidence is at its lowest level for 30 years. The high street is struggling with rising inflation, a weak pound and high energy costs. Many retailers are facing a battle for survival over the winter. So where do things stand today on government support?

In September, the BID industry’s #BusinessSOS campaign led calls for the government to reduce VAT (from 20% to 12.5%), reduce Business Rates (100% relief until 31st March 2023) and provide Energy Rate Relief (apply a discounted rate on all business energy bills).

The key measures the government has introduced so far are:

Lowering Taxation For Businesses

– Reversing the 1.25% National Insurance increase (due 6th November)
– Cancelling the increase in Corporation Tax from 19% to 25% (due next year)
– Scrapping the dividend rate increase for company directors (company directors will be better off)
– Alcohol duty frozen with 5% cuts extended to 20 litre kegs

For businesses paying the living wage, the NI reversal saves around £240 a year for each member of staff. The Corporation Tax cut only benefits those companies making more than £50,000 profit. It will have a significant impact for those businesses already doing well. Keeping dividend rates the same will benefit company owners – again assuming they are in profit – and the alcohol duty freeze will bring some relief to the hospitality sector. Note that the Chancellor has lifted the burden of planned future increases but there’s been little to change the status quo …

Discounting Business Energy Bills

– Providing a government-backed price of £211 per MWh for electricity and £75 per MWh for gas.
– Energy suppliers will charge business customers at these fixed rates until March 2023. The government will pay any difference in the wholesale price.

These measures will lower the average business energy bill by 45% for the next 6 months. Although welcome, for most businesses it doesn’t mean the worry is over. Many businesses are experiencing hikes of 300% or more.

Putting Money In Consumers’ Pockets

– Cutting the basic rate of income tax from 20% to 19% in April 2023
– Reversing the 1.25% National Insurance increase (due 6th November)
– Energy Price Guarantee (Saving an average of £1000 per household) and Energy Bill Support Scheme (£400 per household)
– A new digital VAT-free shopping scheme for non-resident visitors

The basic rate of tax is paid on incomes between £12,571 and £50,270 a year. Someone earning around £40,000 will save £460 per year. The cut is expected to benefit 31 million income taxpayers, putting just over £5bn back in to the economy according to the Treasury. Meanwhile, the NI reversal will mean employees will save anywhere between £93 (earning £20,000 per annum) to £1093 (earning £100,000 per annum). For towns and cities that attract international tourists, it’s anticipated the VAT-free shopping scheme will be in place by 2024 with 20% reclaimable on purchases by visitors on departure from the UK.

Other Measures

Other measures including repealing the IR35 reforms, establishing Investment Zones and changes to Stamp Duty. Yesterday, the Chancellor abandoned plans to scrap the 45p income tax rate for people earning more than £150,000.

Has The Government Done Enough?

As things stand, town centres are still facing an extremely challenging winter. Furthermore, the first two quarters of 2023 are likely to be extremely difficult as the cost of living and interest rate hikes become more acutely felt by consumers.

Unfortunately, we are still a long way off the kind of measures the #BusinessSOS campaign has been calling for.

Very little help has been announced for businesses that have suffered in recent years and are on the brink of failure. Many companies will find that any savings in taxation have been wiped out by the increase in energy costs.

If we are to support struggling town centres, we urgently need to see a material reduction in operating costs for all high street businesses. This needs to come in the form of temporary relief and reform of the business rates system. Whether the government will reduce VAT remains to be seen.

For consumers, the shock of the Chancellor’s mini-budget on markets has led to a £65 million intervention by the Bank of England and a major hike in interest rates.

Mortgages are expected to rise to 5.5-6% in the first half of 2023. This could mean an extra £400 (£150k mortgage) to £1000 (£400k mortgage) added to household budgets each month – again, wiping out any savings in income tax or NI. Many households may find such significant increases take their budgets to breaking point, forcing house sales.

In summary, the pressure on the government needs to remain steadfast. The #BusinessSOS campaign must continue to push for the 3 essential points of relief as BIDs up and down the country recommend.

In the meantime, town centres must engage with local residents to impress just how important it is to buy and spend locally. Goodwill will be as important to the survival of local businesses throughout the impending financial crisis as it was during the pandemic.