Retail industry reacts to budget with scepticism, general dismay

Immediate reaction to Chancellor Rachel Reeves’s first budget has not been positive.

Our regular columnist, CEO of the British Independent Retailers Association (BIRA), Andrew Goodacre, condemned the budget out of hand, calling it, “Without doubt the worst for independent retailers I have seen in my time representing the sector. The government's actions today show complete disregard for the thousands of hard-working shop owners who form the backbone of our high streets.”

He said, "This Budget betrays every independent retailer who has fought to keep their business alive through recent challenges. It's not just disappointing – it's potentially catastrophic for Britain's high streets."

There were crumbs, or rather drops, of comfort. Reeves made much of the fact that there is a penny off a pint of beer (thereby saving nearly a shilling when getting drunk), although Simon Shelbourn, Chief Financial Officer for employee-owned Kingsland Drinks, pointed out that while publicans might be feeling optimistic, retailers are drinking the dregs of good fortune:

“Further taxing non-draft alcohol hurts everyone; Whilst the government is working hard to plug the hole in the country’s finances, the consumer is being further penalised despite already bearing the weight of the cost-of-living crisis, and much of the drinks industry will once again have to prove its resilience despite being positioned to drive economic growth."

He said that the move to wallop bottled beer is damaging to the industry and a setback to firms across the board “who have worked tirelessly in recent years to withstand relentless taxation in the toughest of trading conditions.”

James Lowman, CEO of the Association of Convenience Stores (ACS), quickly drew up a list of disappointments, which he apostrophized as “two-thirds of a billion pounds to the direct cost base of the UK’s local shops” – although he pointed out that, “The smallest retailers, with low NICs bills and lower rateable values for their shops, will benefit from the welcome increase in the employment allowance and the retention of 40 per cent of the retail business rates relief.”

Lowman was enthusiastic about the Chancellor’s commitment to tackling shop theft, but stressed that his long-disillusioned members “are interested only in action and in crime against their stores and their colleagues being tackled effectively.” – in other words, we’ll believe it when we see it.

The Institute of Economic Affairs predictably criticised Reeves on ideological grounds, with Tom Clougherty, Executive Director, stating, “The Government came into office promising to prioritise growth. But the reality of their first Budget – heavier burdens on business and more borrowing for public sector capital spending – does not inspire much confidence in their approach.”

He added, more in anger than sorrow: “Coming alongside an inflation-busting increase in the minimum wage and heavy-handed changes to employment law, higher employer National Insurance Contributions will be a bitter pill for firms to swallow. Businesses will see their costs rise and it will be workers who pay the price – in the form of lower wages, reduced benefits, and fewer job opportunities. The idea that this Budget does not increase taxes on workers is an economic fantasy.”

The Fed’s National President, Mo Razzaq, welcomed the alleged “crackdown on crime” and the end of the infamous “£200 rule”, but also echoed the sentiment that a higher minimum wage will lead directly to fewer retail establishments:

“A bigger-than-expected rise to the national living wage to £12.21 an hour from April 2025 is a step too far for hard-pressed small businesses,” he opined.

“As well as paying our staff more in wages, we must pay more in national insurance and pension costs, at a time when many of our other costs, including energy, are rising. There is no easy way for small retailers to combat these increases. As so many of the products that convenience store owners sell are price marked, we cannot pass these costs onto our customers.

“The only solution available to independent shop owners is to reduce staff hours and staff numbers and, somehow, take on even more hours ourselves.”

Pleasures are being penalised, some would say as usual. Nuno Teles, Managing Director of Diageo GB, felt betrayed by increased taxes on spirits – which will take the minimum tax burden on a bottle of Scotch Whisky above £12 for the first time – saying, “On the campaign trail, Keir Starmer pledged to ‘back the Scotch whisky industry to the hilt’. Instead, the Government has broken this promise and slammed even more duty on spirits. This betrayal will leave a bitter taste for drinkers and pubs while jeopardising jobs and investment across Scotland.”

Speaking of Scotland, the MD of the Scottish Licensed Trade Association (SLTA), Colin Wilkinson, although he welcomed the 40 per cent relief on business rates for retail, leisure and hospitality (up to a cap of £25,000), spoke of a “triple blow of an increase in the NLW, risen by 50 per cent in five years, increased employer National Insurance contributions and a 50 per cent reduction in the threshold level for Employer National Insurance contributions.

“These will be yet another fiscal burden for all businesses and will restrict investment, restrict growth and increase the risk of job losses,” he said. “As a staff-intensive sector, many in the licensed hospitality industry will now be questioning whether or not they can even maintain their current staffing levels.”

Mo Razzaq also raised the alarm at the tobacco and next gen gantry, arguing that byputting duty up by 10 per cent on hand-rolling tobacco, a flat rate duty on all vaping liquids, a one-off increase in tobacco duty in line with RPI “were further blows to independent retailers”.

He pointed out something that we have been talking about until blue in the face recently: “When tobacco prices rise, more smokers are lured to the illicit market, which damages the business of legitimate retailers and damages communities. The government needs to do more to tackle the illicit market to better protect the livelihoods of members who legitimately sell tobacco.”

The last word should go to Mike Salem, the UK Country Associate for the Consumer Choice Center (CCC), who said that “Reeves wants to punish consumers for spending their own money, and these taxes were never really about public health or nudging, but a cash grab from hard-working British people.”

He called the Budget an economic "Reeversal".