Drapers asks industry leaders what the next government needs to do for business and measures how the parties’ pledges stand up.
On 12 December, the public will head to the polls for the second time in just over two years. Yet much has changed in the comparatively short time since the last election.
With the extended Brexit deadline, a deal is still an option, and the Conservatives are seeking to secure a mandate to bring the UK out of the European Union. However, will “getting Brexit done” help fashion retail? And with the manifestos for all parties yet to be fully published, what else can businesses expect if the parties are put in power?
Many industry figures told Drapers the timing of the election could not be worse.
One brand owner said: “I’ll be voting Conservative [but the election] is just another hurdle for consumer confidence. It’s going to take any shine that’s left off Christmas [trading].”
The 2019 election will be dominated by the personalities of the leading two parties. Jeremy Corbyn, as leader of the opposition, is on his second general election campaign, against prime minister Boris Johnson, who has inherited a Tory party that is arguably in disarray but has a lead in the polls.
One high street multiple retailer said the nation has to choose between two poor candidates: “I have an aversion to Boris because he’s doing [the election] more for himself than the country and it’s a personal campaign. But if you look at Corbyn, he has some grand ideas that are in some ways unworkable. His ideas seem a little too radical.”
Drapers asked the industry what the biggest issues are and examined how the parties promise to alleviate them.
Business rate reform has become even more pressing since the 2017 election. The retail industry accounts for 5% of the UK economy, yet pays 10% of all business taxes and 25% of business rates.
On 1 April, the business rate “multiplier” in England rose to 50.4p for 2019/20 – the first time this business tax has risen above 50%. When the national business rates system was introduced in 1990, the multiplier was set at 34.8p.
Retailers will have to pay an extra £137m next year, after it was confirmed in August that inflation will increase the tax by 1.7% in 2020/21.
On Monday, Boris Johnson U-turned on a plan to cut corporation tax, and announced yet another review of business rates if elected, following on from the Conservatives’ 15 November pledge to reduce rates for small businesses. Business rate discounts for small businesses would increase from 33% to 50% by 2020/21.
However, Robert Hayton, head of UK business rates at real estate adviser Altus Group, said the measures do nothing for larger retailers: “While the announcement is definitely a step in the right direction, more can be done to help to reduce what are the highest property taxes in Europe. For example, rates bills [should] fall in line with declining property values [immediately] at the next revaluation, rather than reductions being phased in.”
The obvious thing is business rates don’t work, and they need to be sorted out
In September, Labour’s Rachel Reeves, chairman of the business, energy and industrial strategy committee, told the Federation of Small Businesses that rates reform must “be looked at it in the round”. However, so far in the election cycle, Labour has made no mention of rates reform. In August, the party promised to tackle the “retail apocalypse” and help struggling high streets by allowing councils to take over shops that were vacant for more than a year.
The Liberal Democrats propose to abolish business rates entirely and replace them with a “commercial landowner levy”, which would be payable by landlords and calculated on the value of the land their tenants occupy.
Meanwhile, the Brexit Party told Drapers it would prioritise lowering business rates outside the capital. Jack Irvine, director of campaign communications, said: “We support our high streets, and we propose slashing business rates outside London.”
One retail CEO said: “The obvious thing is business rates don’t work, and they need to be sorted out. Bricks and mortar still account for 75% of the [retail] market, but the rates or rents you pay vary hugely depending on where you are. One of the parties, or all of them, need to commit to a proper modern-day business rates solution.”
A former retail CEO wants more clarity on what business rates are actually used for: “Online isn’t the nirvana that it once was, and the costs have risen exponentially. However, we never really see where the money from our business rates goes. It doesn’t go on cleaning my high street. It doesn’t go on better transport for the town. I’d like to see a way of regenerating the high street and making physical shopping less punitive.”
Online sales tax
Many bricks-and-mortar retailers have outlined concerns over the disparity between pureplay retailers and those with physical stores.
In 2018, the Conservatives mooted an online sales tax, but those plans have yet to be firmed up in their commitment so far in the election. They are now proposing tax relief for landlords and builders.
The Labour party announced plans to raise up to £6bn on global profits and UK sales from big digital businesses such as Amazon, Google and Facebook to pay for free fibre broadband for every household in the UK. Details of what percentage of this would be from retail sales have not been announced.
Liberal Democrat economy and business adviser Michael Patrikalakis told Drapers the party’s proposed landowner levy would help to give bricks-and-mortar retail “a more level playing field”.
Skills and training
A key consideration after Brexit will be what any government does to support UK skills training.
In terms of spending that could benefit manufacturers, the Conservatives have promised to double the research and development budget to £18bn, but it is not clear what sectors this would benefit.
We need more investment in research and development
Jenny Holloway, Fashion Enter
Labour has promised up to £3bn to pay for job retraining and help to tackle skills shortages, offering six years’ free education for adults, under the “National Education Service”. On Monday, it announced plans to train up to 80,000 people a year in “climate apprenticeships” for areas such as renewable energy. This is intended to be part funded by diverting 25% of the money that employers pay into the Apprenticeship Levy. Labour also plans to give employers more choice in how they spend levy funds.
The Liberal Democrats have plans for a “skills wallet” to give every UK citizen a £10,000 allowance to be spent on education and training over their lifetimes. Patrikalakis also said the Liberal Democrats would “significantly overhaul” the Apprenticeship Levy to target training to the areas with the greatest skills needs. UK manufacturers would argue these include fashion.
Jenny Holloway, owner of London manufacturer Fashion Enter, said: “We need more investment in research and development. Everyone’s talking about artificial intelligence, and we have ‘sew-bots’, but we need support so that UK companies who do robotics can team up and have alliances with the industry.”
The biggest issue in the election is Brexit. The Conservatives have stated that, if they win the election, they will secure their deal with the EU, then negotiate a trade deal in just 12 months, with no extensions.
The Labour party has pledged to negotiate a closer post-Brexit relationship and then hand the choice back to voters in a referendum – that includes the option to remain – within six months.
If they gain a majority, the Liberal Democrats intend to immediately revoke the article 50 decision to leave the EU. Party leader Jo Swinson said this week that the Liberal Democrats are “the natural party of business”.
All the industry leaders Drapers spoke to said they were craving certainty over Brexit.
“[With Brexit] I’m completely over it. Get it done,” said Holloway. “The anxiety and uncertainty have played havoc, but the only good news is that more retailers than ever have enquired about UK production, and that has helped us win business.”
One high street multiple retailer said Brexit has been a distraction: “MPs have been so distracted with this nonsense that is Brexit. The ‘get Brexit done’ is probably the best thing to do. What happens if you get a close call [in another referendum]?”
The former retail CEO added: “One thing on my wish list would be to create some hope and positivity, and make people start to feel better about life and less anxious. It’s not just the chaos [of Brexit] – it’s the unpleasantness of how the world is conducted and how our so-called leaders are behaving. Brexit has become a platform for people to be rude to each other. We need a return to stability and optimism, and a place where people want to actually stay.”