The UK retail and hospitality industries have called on new chancellor Kwasi Kwarteng to provide urgent financial support in his mini-Budget on Friday to offset the “cost of business” crisis unleashed by surging inflation.
Britain’s retailers have warned inflation will add a further £800mn to business rates in the coming year because of the way the property-based tax paid by companies is calculated.
The tax charge is estimated by applying a multiplier, which rises with inflation each year, to a commercial property’s rateable value. With consumer price inflation currently running at a near 40-year high, the multiplier looks set to increase business rates significantly in the coming year.
In a letter to Kwarteng, Helen Dickinson, chief executive of the British Retail Consortium, a trade body, said the multiplier needed to be frozen to support efforts by retailers to keep prices down for consumers. “Rising costs are starting to feed through into prices,” she added.
The BRC is also concerned about how the cost of living crisis will affect the so-called golden quarter for retailers running up to Christmas, when sales normally peak. It said “consumer spending will be considerably constrained this winter with inflation continuing to climb and energy bills rising further”.
On Friday, Kwarteng is expected to unveil a mini-Budget involving a package of tax cuts alongside more details of new prime minister Liz Truss’s plan unveiled this month to hold down the soaring energy bills for businesses.
The Financial Times revealed last week that the state system of company support may not be ready until November, although the government has committed to backdating payments if necessary to the start of October.
Dickinson urged Kwarteng to move quickly, saying that “businesses need clarity on the government’s intentions as soon as possible so that they can understand their future costs, and plan accordingly”.
In a separate letter sent to Kwarteng last week, seven hospitality industry bodies and campaign groups said businesses “could not wait any longer” to understand the level of government support for energy bills and whether they could afford to enter into costly new fixed-term contracts.
“The initial announcement helped businesses breathe an initial sigh of relief, but most are still in the dark as to how the guarantee might help them,” said the letter.
The vast majority of UK businesses renew their fixed-term electricity and gas contracts in October.
The trade bodies, including UKHospitality, the British Beer and Pub Association and the Campaign for Real Ale, also called for a reduction in value added tax on food and drink sales, and a temporary cancellation of business rates for the sector.
The bodies pushed for clarity on government support in the long term, adding that short term relief will provide a lifeline for businesses “on the brink of closure, but more support is needed, as well as a plan beyond the next six months”.
The letter said: “We need policies that ensure our survival through the winter which will allow us to invest in the long-term potential of our sector, action on the tax burdens that are stunting our growth and a government that understands the extremely critical situation we’re currently in.”
The BRC letter called for a long-term commitment from the government to business rates reform and solutions to labour shortages.
The trade group also accused the government of confused policymaking, saying a “lack of joined-up thinking when it comes to policies related to the industry, many of which are adding significantly to the cost burden the industry is dealing with and require significant investment of time”.
The BRC said the government should pause “any initiatives that are not urgent in the current challenging economic environment”.