5 minute read
Retail Opinion - John Ryan writes about the implication of the cut in business rates for retailers
Business rate cut:
a drop in the ocean?
John Ryan asks: at first glance, a 50% cut in business rates looks like it could be heaven-sent help for toy indies - but is it too good to be true?
It may not be helping you just yet, but in Chancellor Rishi Sunak’s Budget speech in October, he unveiled a package that will allow retailers (among others) to benefit from a 50% cut in limit that supply (or cut it off entirely) accordingly. It’s simple economics - as is the business rates cut that Rishi has dished out. In Micawber-like fashion - as tends to be the business rates, up to a maximum of £110,000. case with governmental balance sheets - the Chancellor has
On the face of it, this would seem like pretty good news. But looked at what has been spent and has divvied up what he can (and it’s a substantial but) what remains unclear is how this will be hand out, in the face of an economy that has performed slightly applied. If the view taken is that every store in the land is a business better over the past six months than had been predicted. in its own right, then the measure would be something of a Yet the apparent similarity between running a toy retail jamboree, and even with price pressure on everything from utilities business and macro-economics is not as straightforward to the products that go on the shelves, there might even be a net as it might appear. The major difference between the two gain in all of this. is that if the Government overshoots, it just borrows some
Sadly, this seems unlikely. More likely is that the tax cut will be money and, over time, it may not even have to pay it back. applied per business as a whole, meaning that single store owners Not so if you happen to be a single store owner who has to will breathe a massive sigh of relief. But if you have just a few shops, let alone a chain, then this will be a drop in the fiscal ocean. The physical toy retailing business actually has relatively few large players, with much of the sector “ Be positive: around this make ends meet. Head down to the bank and ask for a loan extension, but patiently explain that you’re not quite sure when exactly you’ll be able to pay it back, and you’ll not be entirely surprised to be being the preserve of the standalone store. The other time a year politely shown the door. In the real retail world, if point is that the 50% cut is only temporary and will hold good for the tax year 2022-23. Or put another way, ago, it your store doesn’t show a net profit, the premises are likely to end up in the hands of somebody else that’s a year from next April - and meanwhile the heavy continued to who can make the space work a little harder. hand of the taxman will continue to feel your collar. look as if the But back to business rates. The 2022-23 cut is But look on the bright side. At least the shops stand a good chance of being open right through world might still a positive move and, given the notoriously short-term view of finance taken by all retailers, the festive period and beyond - and you don’t need be heading from toy shops to supermarkets, it should be to have a terribly good memory to remember when for a total welcomed. A year is long enough to make this was not the case. The real question is: will the business rates discount be a temporary one-year stay of execution as toy shop proprietors face a bewildering crash ” changes, and who knows, the constraints on utilities, inflation and the cost of materials might all be unpleasant blips by the time April 2023 hoves into view. array of costs that may not have been anticipated at the In the meantime, it’s heads down and get on with it. Don’t beginning of the year? expect things to be easier, but Rishi might just have offered And the answer is, as almost always, it depends. Success in enough leeway for things to rumble. Be positive: around this retail used to be contingent on there being enough left over, time a year ago, it continued to look as if the world might be after product costs and the price of operating from your heading for a total crash. That has not materialised, and it is own premises was taken into account. As such, it was certain that after a difficult year, shoppers will be looking to fairly predictable, and the real operators put themselves treat their loved ones - and that will mean sales… in a position where they were able to buy products for I may have omitted to mention the little matter of getting less and sell at the same price as others. goods off the boats and into the shops, but this seems That was largely in pre-branding days and the whip almost a minor consideration when set against what’s been hand has long since passed to the supplier as far as going on. You wouldn’t be in retail if you weren’t something the cost of things is concerned. Brands worked out of an optimist, and there do seem to be, in spite of everything some time back that by limiting the supply of specific that suggests the contrary, grounds for cautious optimism. If items, they can control demand and, where something is you don’t agree with any of this, Seasons Greetings to you, as sold below the price they expect it to be retailed at, they one door shuts...
