Retail confidence falls at its fastest rate since 2008
Confidence amongst retailers has dropped at its fastest rate in 17 years as firms become increasingly pessimistic about their fortunes amid high taxes and low spending.
Retailers expect demand to remain subdued heading into December, with sales set to fall again – albeit at a somewhat slower pace, according to the CBI’s latest quarterly Distributive Trades Survey.
With demand still weak and uncertainty mounting ahead of the Budget, retailers plan to pull back on both investment and hiring, the CBI found.
“Retailers continue to grapple with a long spell of weak demand, as households remain cautious around day-to-day spending,” Alpesh Paleja, deputy chief economist of the CBI, said.
“With all eyes on the forthcoming Budget, uncertainty in the run-up has meant that businesses are holding back on plans for investment and hiring,” Paleja added.
An increase in national insurance contributions (NICs) in last October’s Budget hit the retail sector hard, while uncertainty around the upcoming budget, as well as the tail end of a long cost-of-living crisis and the end of business rates relief, has compounded the situation.
It’s not just the last year and a half, though: The UK’s retail sector has been haemorrhaging jobs, with a 10 per cent reduction in its workforce since 2015 and another 10 per cent set to go in the next three years.
The combination of low spending, high taxes and rising costs has pushed many firms to the breaking point over the last decade, with commentators describing it as a “permacrisis”.
‘Businesses want bold decisions’
Retailers are looking to Reeves’ second budget on Wednesday for relief from high taxes and a plan for growth.
“The Chancellor must avoid pulling the business tax lever once again, at risk of further curtailing firms’ efforts to build a more resilient, dynamic economy.
“Businesses want bold decisions to wrestle back the government’s fiscal headroom and get the economy on a solid path to prosperity,” Paleja said.
Shops are particularly looking to the Budget in hopes of easing business rates, one of the sector’s most-hated taxes.
Reeves has promised to reform the business rates system by creating an upper and lower tax band for shops either side of a £500,000 valuation, but the exact levy has yet to be announced.
The chief executive of the British Retail Consortium (BRC) has said that “now is the moment for the government to deliver on their manifesto’s business rates commitment, exclude retail from the new business rates surtax and ensure a meaningful rates reduction for the industry”.