Following this afternoon’s autumn statement announcement by the chancellor Philip Hammond, here is a round-up of comments from industry figures on the likely effect on the UK economy over the next fiscal year.
Report: Autumn Statement 2016: UK economy wobbles as Brexit feeds uncertainty
Ian Wright CBE, Food and Drink Federation director general said: “Food and drink manufacturing is strategically important to the UK economy and in ensuring future food security. Worth £21.9 billion, employing around 400,000 people, and feeding millions every day, UK food and drink manufacturers have been a beacon of productivity and export growth, as this week’s exceptional figures showed. Exports of branded food and drink are at their highest level on record and yet there is massive untapped opportunity for UK businesses. Doubling of export finance capacity to support trade is welcome. We will work with UK Export Finance (UKEF) to boost awareness among food and drink exporters of the products and services they provide. For food and drink producers, it’s the on-the-ground support such as mentoring and increased UK presence at internationals trade shows which can result in the greatest gains. With its regional spread, food and drink manufacturers are well placed to help ensure every corner of the UK shares in economic success. The £23bn funding for productivity is the right commitment at the right time. Productivity growth in food and drink manufacturing continues to outstrip the wider economy and FDF, with our President, Dame Fiona Kendrick of Nestlé, has worked with Sir Charlie Mayfield and other industrial partners to identify the levers to turbocharge future progress. FDF published its action plan for industry earlier this summer. For food and drink, the Chancellor’s support for the productivity agenda and extra funding for innovation more broadly means better skilled jobs, more sustainable manufacturing processes, and greater capacity for R&D.An effective partnership between industry and Government has never been more important as we face into the significant economic challenges described in today’s Autumn Statement and embark on a new relationship with the EU and the rest of the world. We need a new industrial strategy, informed by the particular needs of food and drink manufacturers, so we can sustain our workforce needs, access essential raw ingredients and maintain consumer confidence in our industry.”
Tim Ryan, executive chairman at UNA said: “In the space of a year insurance premium tax (IPT) has now risen from 6% to 10% and now to 12%. This is a significant blow. As a result this will significantly hit the pockets of families throughout the country with significant figures being added to the average buildings and contents policies. When IPT was initially raised to 9.5%, which was bad enough, our own survey of 1000 consumers found that a quarter were forgoing buying insurance as a result. This is a huge concern as it increases their personal risks, and in the case of motor insurance could mean a rise in illegal drivers. Now, from June, this risk is heightened even further. The case of reducing fraudulent claims is a huge and well documented battle facing the insurance industry and the introduction of a rule change on whiplash compensation is some relief. We need to continue tackling this issue head-on to ensure the honest consumers can benefit from the most competitive insurance deals but I fear another rise in IPT is going to seriously hamper this. It is crucial that the industry finds the right balance between preserving access to justice for innocent victims whilst ensuring that exaggerated and fraudulent claims can be challenged.”
Phil Mullis, partner and head of retail and wholesale, at Wilkins Kennedy, said: “The Government has been under pressure for quite some time to reform the outdated rates system and until they do many retailers could find themselves worse off. What’s more, the depreciated value of currency has burdened retailers, because they are under obligation to absorb shortfalls and keep their prices low. Now, increased wage rises will leave retailers no choice but to increase prices. Unless the Government steps up with a more solid support structure for retailers, these latest wage increases could mean an uncertain future for retailers. It will be interesting to see the long term effects from the changes and how smaller businesses will benefit.”
Ian McVey, UK director, at Qualtrics said: “Employee engagement must be a key metric in the Chancellor’s efforts ts to boost UK productivity”. Low productivity walks hand in hand with dysfunctional employee engagement. In tough times, CEOs need all the friends they can get and they have never needed to keep their employees as close as they do now. When disruption is the only constant, the employee is the strongest link with which to maintain customer trust and connectivity. The evidence is clear. Strong employee engagement reduces turnover, boosts motivation and dramatically improves outcomes for companies and customers alike”.
Colin Valentine, CAMRA’s National Chairman said: “CAMRA welcomes the Chancellor’s decision not to raise beer duty in the Autumn Statement. Pubs are under a huge amount of financial pressure and with UK beer drinkers paying 52.2p of duty on their pint we are seeing more and more people choosing to drink at home rather than at their local. This trend not only hurts UK businesses, but is also contributing to the demise of our communities and affects people’s personal wellbeing. While a freeze in beer duty is welcome, CAMRA would like to see the Government do more to reverse the damage done by the beer duty escalator by cutting duty in the 2017 Budget.”
Helen Dickinson OBE, BRC chief executive, said: “Today’s modest but targeted measures by the Chancellor to boost productivity are to be applauded. The new National Productivity Investment Fund has the potential to make a real difference. So too do the plans to improve the UK’s connectivity, with funding for digital infrastructure benefiting the entire UK. Retailers and other businesses on the high street will benefit from further investment to improve local transport networks. Taken together these measures should support the retail industry as it seeks to improve its own productivity. Some changes will provide a bit more room to breathe for cash strapped consumers on low and middle incomes. Today’s forecasts show that over the period to 2020 there will be £34bn less in private spending in the UK economy that the OBR predicted in March, while the medium term outlook is challenging for the industry”.
Peter Burgess, director at Retail Human Resources, said: “This was expected but that doesn’t make it right. Pensioners have already done extremely well and someone has to pay. Unfortunately it is the young families who are paying for this generosity to pensioners, many of whom would agree that its time to look after those with young families. I think this was the right time for the chancellor to scrap the triple lock on pensions as this cannot be afforded and is draining away cash from all of these families who so desperately need it. There is already a significant and unfair imbalance amongst generations. By scrapping the triple lock on pensions this would have closed that gap significantly. It is unfair and unsustainable for the UK’s younger families.”
James Lowman, ACS chief executive, said: “We welcome the introduction of 100% rural rate relief for small businesses operating in isolated areas and reduction in transitional rate relief caps. Over a third of stores in the convenience sector operate in rural areas, playing an essential role in their communities. However, we urge government to ensure that their plans to develop infrastructure in the UK include rural areas that have often been left with substandard broadband and mobile coverage. Convenience store retailers are already cutting back as a result of the introduction of the National Living Wage at £7.20. Today’s announcement of a £7.50 National Living Wage rate in 2017 will result in further staff hours being cut, investment plans being delayed or cancelled altogether and retailers having to take on more hours in the business to make ends meet. We are disappointed at the Chancellor’s refusal to acknowledge the unfair business rates appeals system in the Autumn Statement. At a time when business rates are increasing for many, ensuring that the appeals process does not leave retailers and other small businesses out of pocket is crucial. The current plans will see many businesses overpaying on their rates even if their appeals are successful. The chancellor must take immediate action to address this issue.”
Andy Brian, retail partner at Gordons law firm, said: “This increase could pose another headache for grocers less than eight months since the National Living Wage was first introduced. Many employers spent those first few months assessing the impact of increased staff costs and although there has been an element of restructuring, the general feeling was that the new National Living Wage was still only a small increase on the National Minimum Wage that was already in place. Now they are faced with another 30p increase from April and only time will tell the impact this will have on employers. Of course, critics will argue it’s still not enough. It is worth noting that the National Minimum Wage increased every year and it was to be expected that National Living Wage would do the same. In fact, the new figure is less than the £7.64 that had been already been suggested by the Low Pay Commission. It is also significant that even with this increase the Government’s National Living Wage is still almost £1 lower than the voluntary Living Wage, which is set by the Living Wage Foundation, for employees outside of London and £2.25 lower for those in London.”
Mark Rigby, chief executive of CVS Business Rent & Rates Specialists, said: “Today’s Autumn Statement is a missed opportunity for business rates. Businesses are grappling with financial uncertainty, a post-Brexit economy, the fall in Sterling, increases to the national living wage and, as of next year, the apprenticeship levy.The Chancellor has simply not heeded the warning from businesses in these challenging times and the implementation of the recent Revaluation is potentially highly damaging. Over the last couple of months, businesses across the UK have been trying to determine if they are a ‘winner’ or a ‘loser’ of the recent Revaluation. Unbeknown to them all, they’re all set to lose out.The reality is that without intervention from Government today, an extra £558million will be added to England’s overall business rates bill simply through inflation alone.Furthermore, Theresa May this week at the CBI conference announced that she wants to cut Corporation Tax to the lowest level in the G20. We need competitive property taxes now more than ever given the current and future challenges in the economy. The focus must be on the business rates yield, as this is currently the highest of any G20 country both as a percentage of GDP and overall taxation. The Chancellor also, in effect, ‘confirmed’ plans for transitional rate relief as he announced a decrease of 2% to the upwards cap- from 45% to 43%- as of next year. That will be of little comfort when, at the last 3 Revaluations, that cap was 12.5%. He spoke in detail about ‘rebalancing the economy’ and encouraging other regional cities, outside of London and the South East, to prosper. Why then, did he avoid increasing the downwards cap as well, so that businesses, especially in the North- who have seen their tax assessment fall by over 25.2%- could actually receive the full benefit of their reduced tax assessment?”
Edward Cooke, chief Executive at retail property body Revo, said: “Whilst the Chancellor’s commitment to reduce the cap on next year’s increase for large properties – over a rateable value £100,000 – from 45% to 42% in 2017-18, and then from 50% to 32% the year after will be welcomed by some, failure to give businesses the tax reduction they deserve could send some to the wall. The Chancellor failed to mention anything about reform of the opaque appeals system - which research shows could cost small and medium sized businesses almost £700m.” We welcome the focus on infrastructure and the new Housing Infrastructure Fund, given the proven benefits of a joined up approach to infrastructure and property development, and which promise to unlock new development and regeneration to improve places where people live, work, and spend their leisure time.
James Bielby, FWD chief executive, said: “While we support rises in the remuneration of the least well paid, it is not sustainable to absorb another rise from April next year. If the Government continues to pursue above-inflation increases, the result will be higher cost to consumers, stalled investment in the supply chain, and eventually job losses. However there was better news for wholesale distributors with the announcement of the Government’s commitment to investment in transport infrastructure, and the continued freeze in fuel duty announced in today’s Autumn Statement. Any support from the Government in reducing running costs is welcomed by distributors who supply food and drink to communities and small businesses across the UK, but a long-term programme like this will do little to help those facing rising costs now.”
Pete Cheema, SGF chief executive, said: ”We are dismayed at yet another cost increase landing on retailers. We know that last year, for the first time since 2012, there were noticeable reductions in the number of stores and the number of jobs in the Scottish convenience store industry. We can see clear evidence that local shops simply cannot absorb these ever increasing costs. Retailers will be forced to reduce staff hours even more, take on more work themselves and put investment plans on hold”.
Andrew Clark, NFU director of policy, said: “The NFU’s vision is clear: competitive, profitable and progressive farm businesses are central to a dynamic UK food chain and a thriving food and farming sector. Farming is the bedrock of the UK’s food and drink industry worth £108 billion to the economy and providing jobs for 3.9 million people, all while providing great British food. While there are some positives measures announced today, it is disappointing that the Chancellor’s Autumn Statement fell short of delivering measures that will enable our farm businesses to maximise their potential. The Chancellor’s planned reduction to the rate of Corporation Tax, while providing benefits to the supply chain, does little to help the majority of farm businesses that are unincorporated. Farm businesses need to be able to retain and invest profits in infrastructure and equipment to improve their productivity and the tax system needs to recognise and support this, as it does other parts of the economy. The National Living Wage rate will be increased to £7.50 per hour in April 2017. The NFU strongly supports a living wage for all workers but we have expressed to Government our concerns about the speed of the implementation. Accelerating increases will make this even more difficult for employers and we remain concerned about the lack of consultation with the agricultural and horticultural sector on these measures and how they will affect farm businesses. Although the Chancellor has announced a new National Productivity Investment Fund that will add £23 billion in higher value investment over the next five years, including a £2 billion investment in research and development, it is not clear where this will be spent. The Government must continue its support of the Agri-Tech Strategy and this new investment simply must include the agri-food sector. British farming will need a strong and functioning research and development pipeline to deliver solutions to both increase productivity and deliver environmental goods. To achieve this ambition to be at the cutting edge of science and technology, the whole country must be digitally connected and be able to utilise technology. We note the announcement of £700 million into full-fibre connections and 5G. We are eager to see what this will deliver for the remaining 5% unable to access adequate digital infrastructure at the moment – many of whom are in rural areas.”
Brigid Simmonds, Chief Executive, British Beer & Pub Association, said: “We understand action to help those on low pay, but given the current economic uncertainty there is a real need to look at the cost pressures facing pubs. Increases in the National Minimum Wage and Living Wage represent challenges for our sector, particularly in pubs, where labour costs are high, at between 14 and 25 per cent of operating costs. The doubling of Rural Rate Relief provides a welcome correction to an anomaly that would have penalised rural pubs, with pubs that qualify now able to claim 100 per cent relief on their business rates through the rural relief scheme. Whilst we support the reduction in the cap on transitional rate relief, the BBPA and other industry bodies had written to the Chancellor calling for broader support on business rates, prior to his announcement today. We want to see enhanced relief for pubs that will be hit hardest by the 2017 revaluation, and an overall review of how rates impact on Britain’s pubs. There have been no increases in beer duty rates, which is welcome, but duty accounts for up to 50 per cent of the costs of a UK brewer and remains a concern for the industry. Our rate of beer duty in Britain is considerably higher than all other major European brewing nations, and we are now calling on the Chancellor to cut beer duty in the 2017 Spring Budget, and tackle the unfair burden it places on Britain’s beer drinkers, publicans and brewers.The BBPA supports further moves towards a more productive economy and the Chancellor’s support for the Mayfield review. The BBPA has already carried out work with consultants McKinsey on boosting productivity, developing an app called ‘How Good’s Your Business Really?
Susan Samuel, consumer sector partner at Eversheds said: “Although these announcements will bring welcome news to consumers, who are expected to see an increase in their disposable income, retailers’ margins will be under further pressure. The increase to the minimum wage, business rates and expected price hikes due to inflation are likely to have a significant negative impact on retailers. “However, retailers are also looking at how they can use technology to improve profitability. The Chancellor’s announcement that the government will support the private sector by rolling out full-fibre broadband by 2020-21 and 5G mobile communications will provide a better platform to support online sales.”
More to follow …
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