With the Autumn Budget for 2024 on the horizon, industry experts are weighing in on anticipated government moves and their potential impacts on the retail sector.
Analysts are expecting significant measures around taxation, wages, and spending—factors that will directly influence the retail landscape.
Anticipated changes and retail industry impact
Retailers are preparing for announcements from Chancellor Jeremy Hunt that could address ongoing economic challenges such as inflation, labour costs, and consumer spending power.
Many expect that fiscal policies introduced may reflect an attempt to ease cost pressures on businesses while addressing the UK’s fiscal challenges.
Paul Falvey, tax partner at BDO, noted that “retailers and other high street businesses may find relief in potential adjustments to corporation tax and a more transparent corporate tax roadmap” intended to help businesses plan long-term, given the likelihood of a tax cap on corporation tax at 25%
Predictions and expert opinions
- Corporate tax rate cap and roadmap
A central focus in the 2024 Budget predictions is the anticipated capping of the corporation tax rate at 25% for the foreseeable future.
This move, as anticipated by industry leaders, aims to deliver certainty, especially for businesses dealing with the high costs of energy and labour.
Mark Essex from KPMG explained that a steady corporate tax rate could “provide much-needed stability,” especially for retailers looking to expand operations without worrying about fluctuating tax burdens
- Potential Reforms in Business Relief and Inheritance Tax
Discussions have also focused on potential adjustments to business reliefs, specifically inheritance tax relief for business owners, which could be capped or tightened in eligibility criteria.
The Association of Convenience Stores warns that removing or reducing these reliefs could increase the financial strain on family-owned businesses across the UK, particularly those operating in retail, agriculture, and smaller local industries
- Implications of Wage Adjustments and Fiscal Drag
Many experts anticipate an extension of the freeze on income tax bands, which would lead to “fiscal drag”—an increase in effective taxation as more individuals enter higher tax brackets due to inflation.
Retail Economics suggests this could reduce consumer spending, as disposable incomes shrink, and the average household might struggle with rising costs.
This move, paired with potential adjustments to the minimum wage, could place additional pressure on retail wages, further impacting profit margins for smaller retailers already facing operational challenges
A mixed outlook for retailers
The Autumn Budget 2024 is likely to present a mix of outcomes for the retail sector.
While a corporate tax cap could offer stability, wage increases and possible relief cutbacks might offset these gains, particularly for small businesses.
Retailers will be watching closely, preparing for shifts that could shape strategies and consumer behaviour for the year ahead.
