Nish Kankiwala, the outgoing Chief Executive of the John Lewis Partnership, has labelled the recent UK Budget a "two-handed grab" on businesses. He highlighted the increased costs stemming from changes to employers’ national insurance contributions and the absence of business rates reform. Kankiwala joins a growing chorus of retail leaders warning that these measures will raise costs for businesses and prices for consumers, potentially hindering the high street's recovery.

1. Rising Costs for Retailers

The Budget introduced several measures that will significantly increase costs for businesses:

• National Insurance Hike: Employers’ contributions will rise by 1.2 percentage points to 15% starting April 2024. This change particularly affects businesses with large workforces, such as John Lewis and Waitrose.
• Business Rates: Despite Labour's manifesto promise to level the playing field between high street retailers and online giants like Amazon, meaningful reform of business rates has been delayed. Rates are calculated based on property values, disadvantaging high street retailers in prime locations.

Kankiwala estimates these changes will cost John Lewis “tens of millions” annually, adding pressure to the business as it seeks to remain competitive.

2. Impact on High Street Retailers

High street retailers are already grappling with challenges such as rising wages, inflation, and competition from online platforms. Kankiwala expressed disappointment that the Budget failed to address the disparity between physical and online retailers, calling for:

• Radical Business Rates Reform: Kankiwala urged the government to accelerate changes that could reduce the tax burden on high street businesses.
• Delay in National Insurance Changes: He suggested postponing the NI increases to provide relief for struggling retailers.

These measures, he argued, would benefit not only large retailers but also small and medium-sized enterprises across the UK.

3. Challenges for John Lewis Partnership

Despite these pressures, John Lewis and Waitrose remain committed to minimising the impact on consumers. Kankiwala noted:

• Mitigating Inflation: “The last thing we need is a resurgence of inflation,” he said, emphasising the importance of controlling price increases wherever possible.
• Strategic Investments: He reassured that the partnership’s growth plans and investments would continue unchanged.

John Lewis recently reported its first annual profit after three years of losses, a milestone achieved despite challenges such as the pandemic, inflation, and rising competition.

4. Industry-Wide Concerns

The British Retail Consortium has echoed similar concerns, estimating that the Budget changes could cost retailers £7 billion annually. This burden may lead to job losses and further price hikes, particularly as business rates are expected to cost an additional £140 million annually after April 2024.

While relief is available for smaller businesses, large retailers like John Lewis face higher taxes due to their presence in expensive, central locations.

5. Government Response

The Treasury defended the Budget, stating that “difficult choices” were necessary to stabilise the UK economy and create conditions for long-term growth. However, retail leaders argue that the measures risk stifling recovery and putting additional strain on consumers.

Conclusion: A Call for Balance

The UK Budget’s impact on businesses, particularly high street retailers, has sparked widespread criticism. While the government aims to stabilise the economy, leaders like Kankiwala are calling for immediate reforms to support retailers and reduce the financial strain on consumers. The road ahead for high street businesses will require careful navigation to balance growth, affordability, and competitiveness in a challenging economic environment.

Source: (FT.com)