The Chancellor’s red box delivered some welcome news for the fashion industry this week, but with it came a number of unanswered questions and fears for the future.
The government showed it is finally listening to the needs of businesses up and down the country, with its confirmation that there will be a full business rates review to report in time for the budget 2016 and the launch of four regional pilots to test a new model for the tax whereby local authorities can retain 100% of any additional business rate growth to reinvest locally.
With the hope being that this ‘fiscally neutral’ business rates review will better redistribute the currently unfair weight of the onerous tax, these new pilots will be crucial to investigate whether a new system could also be introduced to help local areas better capitalise on the taxes that are being levied on their businesses and use these to further support their local services.
The question will be, how long will these pilots run for before a decision is taken on their effectiveness, and if successful, how quickly can the government roll this out across all regions? The chosen pilots – Greater Manchester, Cambridgeshire, Cheshire East and Peterborough – are by no means the only places suffering under the current system, and retailers both want and need action quickly.
The other welcome news for many fashion exporters was the £7.5m increase in funding for the UKTI this coming financial year which will be used to help support companies looking to trade in China. This is a huge growth market for the fashion industry and one that many will admit they need more advice and support with, compared to other international markets, so extra cash will be well received. However, it is yet to be seen how this will be divvied up and how big a slice the fashion retailers, brands and suppliers can secure.
But despite these positive steps, the elephant in the House of Commons yesterday was VAT. The coalition government was totally silent on the subject, as is to be expected I suppose with just 50 days to go before the general election, but Labour leader Ed Miliband touched on this in his response to Osborne’s budget and how he will fund it, saying: “And everyone knows what’s coming if they were to get back in: another VAT rise. The tax the Tories love to raise. In the finest Tory tradition, deny it before an election and jack it up afterwards.”
He didn’t, of course, confirm that a Labour government wouldn’t do the same.
Rumours have been rumbling for a few months now that a rise in VAT could come after the election, whichever party wins, to fund the necessary deficit reduction plans. This could spell disaster for many retailers now starting to see consumer spending increase again – and the uncertainty over the future that these rumours are creating is just as bad.
The fashion industry can be happy with what has been formally announced in this budget, but we will have to wait and see what the true repercussions will be in the longer term.
- Read our fashion manifesto for the upcoming general election which highlights the key policies retailers, brands and suppliers want the political parties to focus on during their campaigns, and for the successful government to prioritise once in power.