Tax industry leader issues warning: New tax hikes may force beloved retail establishments to collapse
In the Autumn of 2022, the British Retail Consortium (BRC) raised concerns about the potential impact of a tax hike on UK retailers. According to a BRC survey, two-thirds of retail finance directors expect to increase prices over the coming year, with 88% citing taxes and regulation as their top concerns.
The proposed tax hike comes at a time when retailers have already faced significant cost increases. These include rises in employer National Insurance contributions and the national living wage, which have contributed to a £7 billion increase in business costs and taxes borne by the sector.
The BRC emphasized that retail, which makes up 5% of the UK economy, pays a disproportionate share of business taxes and business rates (7.4% and 21%, respectively). The organisation warned that further tax burdens would exacerbate inflation and risk job losses.
Helen Dickinson, the CEO of the BRC, highlighted that despite retailers trying to shield customers from these costs, slim profit margins and rising employment expenses make price rises inevitable. The sector has also reported recruitment freezes, job reductions, and decreased investment due to these pressures.
The BRC urged the government not to impose additional tax burdens in the autumn budget and called for reforms to reduce business rates for retailers to prevent further damage to the high street and local jobs.
If there is another increase in the cost base, the impacts already seen over the last six to nine months would worsen, according to Dickinson. The survey found that over half of retail leadership felt "pessimistic" about trading conditions over the next 12 months, with only 11% voicing optimism.
The BRC's warning is particularly significant given the retail industry's current struggles. The sector has experienced the third most extreme rise in businesses under "critical financial distress" over the past year. Several high street retailers, including Homebase, Hobbycraft, and River Island, have been pushed into administration since the tax changes were announced.
The BRC estimates that the above-inflation hike to the minimum wage will cost its members over £2.7bn annually in higher wage bills. Over six in 10 admitted to having reduced headcount, while 42% said their firm was continuing to implement a hiring freeze.
The Treasury did not respond to a request for comment. However, the CBI's latest business optimism index found negative sentiment endures across sectors, with confidence having taken a hit every month since last year's Budget. The last positive reading the CBI received for firms' expectations on output volumes for the following three months was in August last year.
Helen Dickinson warned that the failure of more retailers would be a "natural consequence" of another bout of tax rises. The BRC has warned that more retailers may go out of business if the government imposes additional tax hikes on businesses in the Autumn.
- The British Retail Consortium (BRC) has called for reforms in the finance and economy sectors, particularly in reducing business rates for retailers, as they pay a disproportionate share of taxes and business rates.
- The BRC highlighted that the retail industry, which contributes 5% to the UK economy, is currently facing a critical financial situation, with several retailers going into administration due to rising costs, including taxes and employer National Insurance contributions.
