The Budget has made it harder for businesses to take on more staff with young people set to bear the brunt, according to High Street bosses.
In a stinging rebuke to Andy Burnham and John Healey, the British Retail Consortium (BRC) said that instead of offering businesses ‘breathing space’, the Chancellor heaped more difficult costs onto employers.
Writing in the Daily Mail, BRC chief executive Helen Dickinson said higher costs and the rising tax burden make it harder to hire, with ‘serious consequences’ for young people.
She said that Healey had ‘made it more expensive to employ people, operate stores and invest, risking higher prices for households.’
And this comes as retailers stand ready to help with a worrying crisis of young people out of employment, offering them a ‘vital first step’ into the working world.
But Labour ‘risks finding itself hamstrung by its own Budget’ as the Government’s own policies make it ‘harder to provide’ opportunities to young workers.
Retailers have warned that the rising cost of doing business will have ‘serious consequences’ for young people.
‘But as employment costs rise, those opportunities become harder to provide,’ she said.
The BRC, whose members include Marks & Spencer, Tesco and B&Q owner Kingfisher, has said that the ‘smoke and mirrors’ Budget has added another £250million to retailers’ business rates bills next April.
This is despite the Chancellor hailing a move to take 70,000 additional small businesses out of paying rates altogether and to freeze rate increases for other retailers in real terms.
Although the BRC had asked for no increase whatsoever, bills will go up by 3.5 per cent, in line with inflation.
Higher rates come hand-in-hand with a £2billion hike in employment costs after a 3.9 per cent increase to wages.
‘Retailers want to pay their colleagues well, but there is a limit to what they can absorb without sacrificing jobs and investment,’ Dickinson said.
Firms ‘desperately needed breathing space from this Budget’ after being hit with mounting costs over the past two years, including £6.5billion in additional employment costs relating to previous Budgets, she said.
Workers’ rights reforms will also ‘add to these pressures’, Dickinson said, pointing to
warnings from The Office for Budget Responsibility (OBR) that proposals could ‘weigh further on the labour market’.
Extra costs are also coming down the line because of the impact of the war in Iran and extreme weather conditions on supply chains.
British retailers’ electricity bills are set to rise by £440million this year, with more than half the cost made up just from levies and taxes.
Dickinson added that the Government’s ‘policies must match its promises’ and called for a reduction in the costs of hiring young people and an overhaul of business rates.
Retailers have called for the threshold to start paying employer National Insurance contributions to be raised. This would make more young people’s jobs exempt from the payments.
Before the Budget, M&S boss Stuart Machin said the threshold being cut ‘hit shops hard, because so many of our jobs are entry-level and part-time, often just a shift or two a week’.
Chancellor Healey failed to deliver breathing room for Britain’s high streets
By Helen Dickinson, Chief Executive of the BRC
Helen Dickinson, chief executive of the British Retail Consortium, has urged the Government to do more to help the High Street.
Britain’s high streets desperately needed breathing space from this Budget. Instead, Chancellor Healey has handed them another bill.
One in seven shops stands empty, more than 120,000 retail jobs have disappeared in two years, and retailers face £41billion in business taxes this year alone. Instead, the Chancellor has made it more expensive to employ people, operate stores and invest, risking higher prices for households.
Take business rates. The Chancellor announced that rates for retail, hospitality and leisure would be frozen in real terms. But dig into the detail and this supposed freeze actually means a 3.5 per cent increase, adding another £250million to retailers’ bills next April.
Removing 70,000 small high street businesses from paying business rates altogether is welcome. But hundreds of thousands of medium and larger retail outlets, responsible for most retail jobs and business rates contributions, will see their bills rise again. Retail accounts for just 5 per cent of the economy but pays more than 20 per cent of business rates.
Employment costs are rising too. Retailers have absorbed £6.5billion in additional employment costs over the past two years, and this Budget adds another £2billion. Retailers want to pay their colleagues well, but there is a limit to what they can absorb without sacrificing jobs and investment.
Some of Labour’s upcoming employment reforms will add to these pressures, with the OBR warning that the Employment Rights Act reforms could “weigh further on the labour market”, with increased uncertainty, reduced flexibility, and higher costs potentially outweighing productivity gains.
That has serious consequences for young people. Almost one million are not in education, employment or training, and retail has long provided a vital first step into work, offering the experience and skills needed to build a career. But as employment costs rise, those opportunities become harder to provide.
With Alan Milburn’s review of youth unemployment due to report soon, Labour risks finding itself hamstrung by its own Budget. Ministers may identify ways to get more young people ready for work, but their own policies risk leaving businesses less able to provide those opportunities.
Retailers are determined to tackle this challenge. Through Opening Shift, more than 40 leading retailers have pledged over 11,000 work experience placements, part of the industry’s wider ambition to create 100,000 jobs for young people not in education, employment or training by the end of this Parliament.
Yet while retailers are taking action, the Chancellor has missed an opportunity to back them.
Raising the threshold at which employers start paying National Insurance contributions, particularly for younger workers, would have helped businesses create more entry-level jobs. Instead, further action could be delayed until the 2027 Budget. Young people cannot afford another year of inaction.
Nor are employment costs the only challenge. Retail electricity bills are expected to rise by £440million this year despite almost no change in usage, with more than half the cost made of levies and taxes. Yet the industry remains excluded from Government schemes aimed at high-energy-use businesses.
Each decision adds to the cost of running a retail business. Together, they leave less money to open stores, invest in communities and create jobs. And with billions in additional costs, more of these pressures risk feeding through into shop prices, making the fight against inflation even harder.
Chancellor Healey has got himself into a pickle: promising to revive Britain’s high streets while piling more costs onto the businesses that keep them alive.
Retailers share the Government’s ambitions for thriving high streets, more jobs and growth in every postcode. They are already doing their bit, investing in communities and creating opportunities for young people.
Now the Government must do its bit. That means reducing the cost and risks of hiring young people, reforming business rates and restoring confidence to invest. If Labour is serious about giving breathing room to Britain’s high streets, its policies must match its promises.
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