Bobby Lane, partner at accountancy firm Shelley Stock Hutter, looks at how the fashion industry fared in the autumn Budget 2017.
The chancellor started off with a reduced forecast of the growth prospects for the UK over the next two years, which does not give huge confidence to anyone looking for positives. However, there will always be winners and losers in a Budget announcement and this is certainly true today.
Many of my smaller fashion clients were growing increasingly concerned over the last week that there would be a huge cut in the VAT threshold. For those selling direct to consumers this would mean their prices would have to increase by 20% or they would suffer a huge fall in profits. Thankfully this did not happen, and the threshold has been retained at £85,000 for the next two years.
The chancellor also announced a clampdown on online VAT fraud, by making online sellers jointly liable through the retailers they sell to. This could be the first step trying to level the playing field between online and bricks-and-mortar retailers. It will be interesting to see if more measures are brought in over the coming years to support our high streets.
From April, the 4.4% increase in the National Living Wage to £7.83 an hour, while great news for those earning it, may put additional pressure on businesses in the sector already facing increased costs and reducing margins.
One of the key issues facing our high street retailers has been business rates. The announcement that these will now be increased in line with the Consumer Price Index (CPI) instead of Retail Prices Index (PRI) is a small help. It is encouraging that this is being recognised as an issue, however this is only a small part of the pressures facing the high street.
What other measures should the chancellor have addressed?
We would have liked to see new measures to help with other areas such as the cost of employment or business finance.
It is good news that the SEIS (Seed Enterprise Investment Scheme) and EIS (Enterprise Investment Scheme) schemes were left unchanged in the main, as these have been great sources of investment for businesses in the fashion sector. While the chancellor doubled the investment limits for technology businesses, we would have liked to have seen this extended to businesses within the fashion sector.
Many of the businesses in the sector that rely on importing or purchasing from abroad have suffered tremendous pressure as a result of weaker sterling. It would have been good to hear the chancellor introduce new incentives or measures to reduce the cost of manufacturing in the UK. There’s always next year.