Retailers of all sizes have been counting the costs introduced by last week’s autumn statement, including the new apprenticeship levy and changes to business rates discounts.
Chancellor George Osborne announced last week that employers will be charged an apprenticeship levy set at 0.5% of their total wage bill to help fund 3 million new apprenticeships by 2020. The levy will start in April 2017, paid through Pay As You Earn.
Employers will receive an allowance of £15,000 to offset their levy payments, meaning the charges will only affect those with a wage bill in excess of £3m – or less than 2% of UK employers, the government said.
But the British Retail Consortium warned the cost to retailers could be in the region of £150m per year and will come on top of the new national living wage, which is effective from next April.
“There are still some questions to be answered on the detail, but it is clear that this is another big cost to be borne by retailers, which would have traditionally been associated with the state,” said BRC external affairs advisor Bryan Johnston.
The BRC welcomed the government’s plans to establish a new employer-led body to set apprenticeship standards and ensure their quality, as announced in the statement.
Small fashion indies are also set to face extra costs as Osborne failed to extend the business rates discount for small retailers and leisure operators, which is set to end in March 2016 after two years.
Business owners can currently benefit from a £1,500 discount on premises with a rateable value of £50,000 or less. This is separate to the Small Business Rate Relief scheme, which Osborne has extended for another year.
“It was a bad day for retail,” said Michael Weedon, deputy chief executive of the British Independent Retailers Association. “The average rateable value of stores in England and Wales is £27,290, so the loss of the discount will hit most small shops directly – and very hard. Our initial research suggests this will cost retailers £417m per year.”
Weedon cited Bira’s most recent research with The Local Data Company, which found that indies across the whole sector closed more stores than they opened in town centres during the first half of 2015, with women’s clothing stores experiencing the biggest decline.
More than 5% of independent womenswear retailers closed during the period, resulting in a net loss of 89 stores and the first decline since 2012.
He urged the chancellor to reinstate the discount before the 2016 budget on March 16.
David McCorquodale, UK head of retail at KPMG, warned that devolved powers for business rates and corporation tax, which were confirmed in the autumn statement, could lead to more red tape for retailers.
“For a national retailer, you could have various different regulations to contend with at local level, which means some of the advantages of running a national business could disappear.”