The chancellor's decision to take 70,000 small high-street businesses out of rates is a rare crumb of comfort from the Budget, but the wider retail and hospitality industry has come away disappointed and let down despite significant lobbying.
The chancellor championed a two-year real terms freeze on business rate relief for the sector. However, the British Retail Consortium warned the headline freeze could still mean a 3.5% rise in bills, adding around £250 million to costs next April. Further analysis shows that it is being funded by a temporary business-rate charge that affects the same sectors.
Pressure Still Building for Independent Retailers
Words aimed to support the industry aren't quite being matched by actions. When you consider wider cost inflation and economic factors, for many independent retailers the pressure is still building.
Research from Zempler Bank, 'The Reinvention of the Independent Retailer', stresses this point. For 58% of small retailers, weak consumer spending is the biggest challenge. Half cite rising operating costs and 44% falling footfall. Cash flow is stretched too, with supplier payments a pressure point for 58% and VAT deadlines for 50%.
Retailers Show Resilience
Thankfully, the economic gloom is being countered by the retailers. Many of whom aren't waiting around. Nearly half (48%) grew revenue last year compared to only 5% who saw it fall.
Two-thirds are selling through more channels than three years ago, 67% have invested in e-commerce or delivery, and 96% say diversification is essential to their future. That resilience should give government confidence, not an excuse to leave retailers to get on with it alone.
What the Sector Wants Next
If we are to see actions, then what would the sector like to see next from government? First, a genuinely level playing field between high-street shops and online sellers. Cracking down on VAT evasion by online sellers is a welcome start, but it's still a few years away. Ending tax relief for the largest online platforms could be what tips customers back towards their local shops.
Second, practical support for the shift retailers are already making. Help with digital tools, e-commerce capability and new product lines would turn a retailer's ambition into sector-wide momentum. Only a quarter of retailers have invested in AI and automation, even though over half see it as a major opportunity. That gap is where targeted support could make the difference.
A rates freeze is a useful start, and removing the smallest firms from the tax is meaningful. It's also a long stretch from the manifesto promise to reform the business rates system altogether. The government said in advance that it would deliver a 'Do No Harm' Budget. In reality, there wasn't a great deal announced, but alongside it was a swathe of technical consultations that always add more complications to business as a whole.
Rather than being performative, perhaps a solution is less so 'Do No Harm' but 'Do Very Little' unless it really makes a difference. Businesses want to be resilient, especially if times are difficult, but they want to grow. This was not answered or addressed.
