With the backing of a landslide victory in December’s general election, prime minister Boris Johnson’s majority government is now preparing to deliver its 2020 Budget to an expectant UK.
Newly appointed chancellor Rishi Sunak will make the financial statement on 11 March.
Amid the ongoing uncertainty surrounding Brexit – albeit that the government is committed to an exit on 31 December – Drapers spoke to a range of fashion businesses across the UK, including manufacturers, brands and retailers, to find out what they are hoping for in this year’s Budget, and how it could help revitalise the fashion retail industry.
The independent view
The Conservative government has pledged to reduce the burden of business rates. Independents agreed this is a priority.
Marc Granditer, managing director of independent designer childrenswear chain Base, agreed the “biggest bugbear” is business rates: “That is absolutely without question a major structural problem in the retail market and there needs to be a more flexible system. It could also be tied into turnover, then everyone wins.”
He also suggested some “directives” from the government to local councils to stop the “heavy-handed” approach that some take towards collecting the tax from independent businesses.
“Consumer confidence is also key, and one looks to the government to support that,” Granditer added.
Martin Brighty, owner of independent retailer Peckham Rye Brands, called for help to get unemployed retail employees back into work: “It’s dreadful to read about so many people having lost their jobs in retail [nearly 10,000 UK retail jobs were lost in the first month of this year, the Centre for Retail Research found]. Could the government provide a scheme for ex-retail staff to retrain and reskill at any age?
“I would also certainly give far more power to [regulator] the Financial Conduct Authority to investigate and fine companies – especially the listed ones – who run their businesses into the ground. This puts pressure on independents, as fewer suppliers are likely to deal with what has become a high-risk sector.”
The brand view
Fashion brands echoed the calls for a change to the business rates regime, and hoped for measures to boost consumer spend, such as a static VAT rate, fuel and alcohol duty.
“VAT has to be left where it is [at 20%],” said the head of wholesale of one global fashion brand. “We can’t make product any more expensive. Fuel duty also needs to stay flat [the Institue for Fiscal Studies has suggested an end to the freeze on fuel duty to give the government £4bn more in revenue]. If fuel goes up, and road transport and freight get more expensive, then distribution costs get higher and wholesalers can’t make their margin, or they have to pass the cost on.
“Alongside fuel, duty on alcohol also needs to stay flat. When consumers are feeling cautious they set themselves a weekly budget and if it’s costing them more to fill their car and to eat and drink out they are going to spend less on fashion.”
He added: “My view on business rates is that everyone is struggling because online retailers aren’t paying it and are managing to skirt corporation tax, so I think a rebalancing of taxation for online business versus bricks and mortar is needed.”
Simon Cope, managing director of British tailoring brand Skopes, stressed the importance of this Budget after such a landslide election: “This Budget will be a big one in that the government has to do something to thank the people for supporting them. So, are they going to support business or do something that will support the working class, who turned their backs on Labour?
“Reduced import duties would help [brands] because that reduces the landed cost price of the garment, but that also depends on what’s happening between the UK and China in terms of ongoing trade wars.”
“I would hope for a business rates review to lower the burden on retailers and make it easier to continue to open stores,” said Fergus Patterson, Gant’s managing director for northern Europe. “Also, some form of stimulus to encourage consumer confidence. Reducing personal income tax and covering it with a sensible, but controlled increase in government borrowing, for example.”
He added: “A change to the pension system is needed for longer-term economic benefit: a removal of the lifetime allowance [the level of pension funds someone can accrue during their lifetime before a tax charge applies] and an introduction of an annual allowance. We have an aging population that is living longer, so it makes sense for them to be more affluent in their retirement.”
The manufacturer view
The manufacturers Drapers spoke to believe they will be largely be ignored in the Budget. However, they have called for grants to invest in machinery and increased funding for the training of domestic workers to counteract the loss of migrant manufacturing workers under the government’s new points-based immigration system.
”After the negative impact of the Brexit vote and now the recent immigration policy, which will decimate the clothing manufacturing industry in Britain, we don’t hold out much hope for anything positive for the manufacturing sector,” Scott Mitchell, general manager at Milton-Keynes based DNA Manufacturing, told Drapers.
“The government stated decades ago it could not compete with emerging economies because of low wages and longer manufacturing hours [in other economies], and we have already seen the likes of China invest heavily in mechanisation. It would be great if the Treasury set aside money for grants for this type of machinery. It would increase our profits, and therefore the tax we pay into the Treasury.”
Kate Hills, founder of UK manufacturing platform Make It British, also raised concerns that the government will “completely disregard” manufacturers in the Budget: “It’s all very well them raising national insurance contributions and the minimum wage to help support low paid workers, but this will hit UK garment manufacturers hard. They are already up against overseas factories that pay much lower wages.
“If they want to prioritise the environment in this Budget, then the government should offer incentives to manufacturers using renewable energy in order to offset the increase in staffing costs.”
The adult education budget, which funds qualifications and programmes for learners aged 19 and above, should be high on the agenda for this year’s Budget to counteract the loss of migrant manufacturing workers under the new immigration rules, said Jenny Holloway, owner of London-based manufacturer Fashion Enter.
“With the unworkable immigration system based on a 70 points qualification and a £25,600 minimum salary benchmark for a migrant, then the government has to be prepared to invest in the ‘so-called’ eight million people who are economically inactive; this is 20% of the workforce aged between 16 – 64,” she said.
“We need an adult education budget that is robust and will target unemployed. Other areas for us include investment in research and development – state-of-the-art [software and hardware] systems should be available throughout the industry.”