Rachel Reeves warned her Budget will wreck small shops and devastate high street _ Hieuuk
Rocketing costs as a result of the Chancellor’s bombshell Budget could force many stores to close
Rachel Reeves (Image: Getty)
Furious shop owners are warning Rachel Reeves’s bombshell Budget will wreck small businesses and change the face of the high street forever.
Many say they are facing rocketing costs that could force them to close up shop.
A triple-whammy of hikes to National Insurance and the National Living Wage while slashing business rate relief – unleashed by the Chancellor two weeks ago – will cause everlasting damage, they have warned.
The impact of Ms Reeve’s brazen attack on the High Street is laid bare in new analysis which shows smaller independent stores face punishing hikes of £3,303 next year.
This is largely made up of her plan to increase employer NI contributions by 1.2% combined with increasing the NLW to £12.21, according to the Retail News magazine.
The figure is based on a “typical” shop that receives full small business rates relief exemption with two-full-time and three part-time employees, one of which is aged between 18 and 20.
David, one of the directors of I Love My PC, a computer sales and repair shop on Gloucester Road, Br (Image: Tom Wren / SWNS)
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Owners of one shop, in Bristol, blasted the Labour budget as “ridiculous”.
David Angel, a director of I Love My PC, a computer sales and repair shop, said: “We were left spitting feathers at the announcement. How much more can they put on us! It’s absurd.
“She has not considered other models she could have introduced to help small businesses to grow. Not beat the hell out of them.”
One of the elements of the budget that will affect small businesses is the minimum wage rise cost for those aged 21 or above which will shoot up by 77p in April.
The increase for those aged 18-20 is even steeper, a £1.40 rise to £10.
Mr Angel said the rise has made it nearly impossible for small businesses to take on new employees.
“Many people are very concerned about the minimum wage, and rightly so,” he said.
“But the majority of people don’t have any regard for whether it is a small or larger business.
“We are a small shop on Gloucester Road in Bristol, employing two people.
“It costs us £100k to not even sell anything!
“So we can no longer afford minimum wage: whatever it costs per hour to employ someone – it costs me double.”
The rate of employer NI contributions is set to rise from 13.8% to 15%.
The government is also slashing the salary threshold where employers need to start paying from £9,100 to £5000, meaning at NLW, it will catch any staff member working above eight hours per week.
He added: “To increase two items on small businesses is so hard.”
Another shop owner, who wanted to remain anonymous, told the Daily Express he could be forced to close his suburban London book store and coffee shop in which he employs eight members of full and part-time staff.
“Things are already tight but these changes will make things incredibly difficult. It might not sound much to people but I’m working on wafer-thin margins,” he said.
“It will be a similar story for many small retailers like me.”
The impact of slashed business rate relief will also clobber small retailers as those in England who do not qualify for small business rates exemptions will face their bills more than doubling.
Shops in Folkestone (Image: Getty Images)
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By Andrew Goodacre CEO of the British Independent Retailers Association
“‘Our high streets are at the heart of our local community … lively vibrant streets … providing the services people need and the livelihood that people deserve.’
“A well-deserved and long-awaited endorsement from none other than Sir Keir Starmer, penned in an opinion piece for The Telegraph & Argus back in April.
“Yes, Prime Minister. I couldn’t agree more. So please, could you explain to your country’s smaller retailers and bars and restaurants exactly why the budget presented by YOUR government risks decimating our high streets?
“Back then you promised to crack down on shoplifting and put an end to the scourge of late payments. Worthy aims, to be sure, but what high street businesses really need is immediate relief from the crippling financial burden outlined last month.
“Let’s start with business rates, which will more than double as the tax reduction introduced during the pandemic drops to 40% from 75%. We campaigned vigorously to retain this lifeline to the smaller retailers.
“It’s senseless to lift business rates after making a manifesto commitment to reduce the tax burden on shops and revitalise high streets.
“Then there’s the rise in employers’ national insurance contributions to 15%, kicking in at that lower threshold of £5,000. Throw in the inflation-busting rise in the minimum wage, and small retailers are fearing for their survival.
“Your government promised a budget for investment and growth. Yet our members are preparing to contract their operations by reducing opening hours and cutting head count.
“Gone are the days when youngsters gained their first taste of the working world through Saturday jobs at the shops. Some of our members see their cost bases expanding by as much as an incomprehensible £150,000 next year.
“I’ve devoted my career to curating our high streets, through positions in the hospitality and retail industries.
“As the head of the British Independent Retailers Association, I represent the interests of more some 4,500 smaller shops owners up and down the country. And they’re terrified.”
The retail, leisure and hospitality rate relief many stores with higher RVs rely on is being slashed from 75% to 40% from 1 April.
For a local shop with a £20,000 RV, this equates to a 140% increase from £2,495 to £5,988 per year.
Chris Noice of the Association of Convenience Stores said the impact is going to be felt unevenly and could reshape the High Street as bigger chains will be able to absorb the higher costs while small chains or independent shops will struggle.
“It could reshape the High Street, particularly in urban areas where their rates are higher. For those businesses the drop in business rate discount is going to have more of an impact.
“If you are a High Street store and you are one of a chain of two or three that kind of business is going to be hit particularly hard.”
Andrew Griffith MP, Shadow Secretary of State for Business and Trade said: “Small retail businesses are at the sharp end of Labour’s tax rises. They’re facing much higher national insurance, increased business rates, and a ban on offering the flexible hours many part time workers rely on.
“Labour simply do not understand what it’s like to run a small business. Not one person around the cabinet table started a small business.
“They are creating a two tier economy where the public sector gets more money as costs rise whilst the private sector is left wringing its hands in despair.”
It comes after some of Britain’s biggest retailers warned the Chancellor that last month’s budget will stoke inflation in the economy and spark job losses as tax hikes add nearly £2.5 billion to the industry’s annual tax bill.
A draft letter to Ms Reeves, coordinated by the British Retail Consortium (BRC) and leaked to Sky News, warns of the “sheer scale of new costs” in the Autumn Budget and the speed with which they occur “will make job losses inevitable, and higher prices a certainty”.
The BRC’s members consist of the major supermarkets, including Asda and Tesco, as well as hundreds of other well-known chains, including B&Q’s parent, Kingfisher.
Its intervention echoes a string of warnings from individual retailers including Marks & Spencer and J Sainsbury about the challenge of absorbing the budget increases to employers’ national insurance and the national living wage.
In the draft, the BRC said it estimated that the NICs changes would increase retailers’ tax burden by £2.3 billion annually, three-quarters of which would come from lowering the earnings threshold from £9,100 to £5,000.
A Treasury spokesperson said: “By taking difficult decisions we have been able to protect retail, hospitality and leisure businesses on the high street by properly funding the NHS to support a healthy workforce, maintaining the small profits rate of corporate tax and, for the first time, permanently cutting their business rates from 2026.
“To help transition to the new, fairer business rates system next year, we are protecting small businesses’ bills from inflation, and extending 40% relief for 250,000 properties, totalling £1.6 billion in relief.”
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