Chancellor John Healey revealed the Government's Budget today (in a more controlled manner than last year's announcement). With pressure to justify PM Andy Burnham's new directions and alleviate at least part of the UK's ongoing economic pressures, he announced a range of changes to taxation and Government policy – and associations and institutions from the retail, manufacturing and property sectors have shared their responses.
Among the changes he outlined, the threshold for small business rate relief for retail hospitality and leisure businesses will be raised from £12,000 to £18,000, with all business rates to be retained locally by the end of the decade. The national minimum wage and national living wage will increase by 3.9% for 2.3 million workers, while extra support for paying energy and fuel bills will be provided.
Helen Dickinson, chief executive of the British Retail Consortium (BRC), comments: “Today’s Budget will see retail costs keep climbing as the Chancellor failed to provide the breathing space he promised. Retail faces £41b in business taxes this year, over 120,000 jobs have been lost in just two years, and one in seven shops lies empty. Yet employment costs continue to rise. Business rates continue to rise. The Government cannot keep talking about reviving high streets while failing to address the rising tide of costs that holds them back.
“This was a smoke and mirrors announcement on business rates. The Chancellor’s headline announcement that he will ‘freeze [retail, hospitality and leisure] rates in real terms’ means a 3.5% increase – another body blow to high streets already struggling with rising costs and empty units.
“It will add around £250m to retailers’ bills next April as one in seven shops lies empty. And while we welcome the decision to remove 70,000 small high street businesses from paying business rates altogether, the overwhelming proportion of employment and rates come from the 500,000 medium and larger retail outlets whose bills will go up once again. Retail accounts for around 5% of the economy yet pays over 20% of business rates. Increasing retail’s burden means less money for investment in jobs, stores, and keeping prices down.
On employment costs, she says: “The Chancellor has squandered a crucial opportunity to start tackling the growing youth employment crisis. The above-inflation increase in the National Living Wage, combined with the lack of any reduction to employer National Insurance Contributions (NICs), will add further pressure on retail jobs.
“Retailers want to pay colleagues well, but Government cannot ignore the fact that today’s announcement adds another £2b on top of the £6.5b in additional employment costs that retailers have faced over the last two years. With over 120,000 jobs already lost since 2024, the country cannot afford to wait until the 2027 Budget and the outcomes of the Milburn review for action. The Chancellor needs to make it easier, not harder, to give young people a start. Today, he failed to do that.
“The implementation of the challenging aspects of the Employment Rights Act must not add further cost and complexity and Government’s response to the Milburn review must be deep-rooted and step changing if we are to secure the futures of a million young people not in education, employment or training.”
On energy costs, she says: “While households will welcome action on domestic energy bills, and businesses will welcome the future de-linking of gas and electricity prices, the Budget fell short of what retail businesses need. The industry’s electricity costs are expected to rise by £440m this year despite almost no change in usage. With non-commodity charges now making up around two-thirds of bills, the Chancellor should have gone further to extend the British Industrial Competitiveness Scheme to retail and its supply chain, and to stop these Government-driven costs finding their way into prices at the checkout.”
On VAT-free shopping, she says: “The UK remains the only major European economy without a tax-free shopping scheme. Analysis has shown that such a scheme could create tens of thousands of new jobs and generate billions in additional tourism spending.”
On online marketplaces collecting VAT, she notes: “Retailers welcome measures to ensure VAT is paid fairly and consistently, regardless of where or how goods are sold. However, Government must ensure the new rules are practical and do not place unnecessary burdens on businesses that are already complying with their tax obligations.”
On tariffs, she concludes: “While we welcome any action aimed at cutting unnecessary costs and friction for food imports, the announced tariff cuts alone will barely touch the sides in offsetting the rising costs supermarkets face, even on the limited number of products affected.”
Chris Brook-Carter, chief executive of retail industry charity, the Retail Trust, comments: “Today’s Budget did contain some measures to support retail businesses and ease the cost of living, but their success will also be judged by the difference they can make to the millions of people working in the retail industry.
“Our latest Retail People Index found that 39% of retail workers are at risk of going into work despite feeling physically or mentally unwell, while almost half are at risk of leaving their jobs. Rising costs continue to put retailers under significant pressure, and their employees are feeling the impact too when it comes to concerns about job security, reduced staffing levels and the support available to them at work.
“The increase in the minimum wage will make a real difference to workers struggling with the cost of living, but we also need to ensure retailers can afford to maintain staffing levels, create new jobs and invest in their people. This is particularly important for young people, many of whom get their first experience of employment in retail.
“We also cannot overlook the crime and abuse shop workers continue to face for doing their jobs. Investment in our high streets must go hand in hand with making them safer places to work. The new protections that form part of the Crime and Policing Act need to be brought into force and backed by consistent enforcement, so employees can feel confident that incidents will be taken seriously.
“Supporting our high streets must also mean supporting the people who keep them running. We need to ensure a retail industry where employees can feel more secure in their jobs, safer at work and better supported when they need help.”
Charlotte Broadbent, UK GM at wholesale marketplace Faire, says: “John Healey said today he wants to be a Chancellor who champions the small firms that give character to our communities, and the support announced in the Budget is the clearest sign yet that the Government understands the challenges they are facing.
“Independent retailers are the backbone of our high streets and the businesses that give people a reason to visit. They have been crying out for more support that properly addresses the financial pressures leaving far too many shopkeepers facing an uncertain future.
“The increase in the Small Business Rates Relief threshold is a welcome step in helping to ease some of these pressures. Every pound a shopkeeper saves on business rates is money that can now be reinvested in stock, staff and new events that bring customers through the door.
“The commitment to prevent above-inflation increases in business rates for other retail businesses over the next two years is also welcome. Unlike larger retail chains, independent shops simply don't have the financial flexibility to absorb sudden increases in their bills.
“However, business rates are only part of the challenge. Independent retailers are also facing rising employment and energy costs at a time when shoppers are becoming increasingly cautious about spending. While increases to the minimum wage are welcome for workers, we must also recognise that independent shops are often where young people get their first experience of work. Keeping employment costs manageable is essential to helping these businesses continue creating opportunities in their communities.
“The Government's investment in high-street regeneration and plans to give local leaders greater funding powers are also encouraging. But buildings alone won't bring our town centres back to life. It's the independent shops and entrepreneurs operating within them that create the character and sense of community that make people want to visit. We need to ensure this investment reaches the businesses themselves, rather than focusing solely on improving the buildings they occupy.”
Molly Monks, founder and director of Parker Walsh, a licensed insolvency practitioner, comments: “The increase in the small business rate relief threshold is a welcome step for Britain’s high streets. For an independent shop, cafe or salon operating on tight margins, reducing a fixed overhead can free up money for wages, stock or simply keeping the doors open.
“But we need to be realistic about what business rates relief can achieve on its own. Businesses are still facing pressure from energy bills, staffing costs, rent and suppliers, while customers remain sensitive to prices. A lower rates bill can create breathing space, but it does not automatically turn an unprofitable business into a viable one.
“The real test will be whether these changes leave businesses with enough cash to invest, recruit and build sustainable profits, rather than simply helping them get through another difficult quarter.
“For businesses already struggling to pay creditors or falling behind on tax liabilities, the relief could help ease pressure, but it may not resolve deeper problems with debt or cash flow. Directors need to look at their whole financial position, not just one line on the balance sheet.
“The Government’s announcement could give many smaller businesses a better chance, but the high street needs more than a rates reduction. Long-term survival depends on whether businesses can cover their costs, attract customers and generate enough profit to keep operating. Owners who are already worried about their finances should use any savings to review their cash flow and seek advice early, before their options become more limited.
“The proposed 25% reduction in electricity bills for eligible industrial businesses is potentially significant, particularly for firms whose operations require substantial amounts of power. However, the key questions will be which businesses qualify, how quickly the support reaches them and whether the savings are sufficient to offset the wider costs they face.
“The Government’s plans to reform how energy costs are structured could be important over the longer term, particularly if they reduce the underlying cost of operating a business rather than simply offering short-term relief.
“But businesses need both immediate support and a predictable environment in which to plan. Uncertainty over future energy bills makes it harder to price contracts, commit to investment and decide whether to expand or recruit."
This story will be updated as further responses emerge.
