UK Budget 2020: Respite for small firms, 'disappointing' for large ones

UK chancellor Rishi Sunak delivered his first budget on Wednesday which included 30 billion pounds to combat the ongoing coronavirus outbreak and the suspension this year of business rates for small companies.

The announcement was partly well received, partly not. The suspension of business rates has been long called for by British firms, and Sunak’s budget somewhat quelled those requests, though some believe it didn’t go far enough.

Business rates for smaller businesses with a rateable value below 51,000 pounds will be scrapped this year, according to the new budget. Sunak said the measure would save each business around 21,000 pounds.

However, this offers little respite for larger retailers which employ the majority of the industry’s 3 million workers and are paying most of its 7.5 billion pound business rates bill. This could be particularly bad for large retailers like Debenhams, House of Fraser and Marks & Spencer which have been struggling in recent years with large business rates.

'It is vital that the burden is reduced for all retailers'

Sunak didn’t detail any further reforms in this regard but did promise a “review” of the business rates system as a whole, with its results due to be reported in autumn.

John Webber, head of business rates at Colliers International, said in a statement: “Whilst helping SME’s is to be applauded, there is nothing in the Budget that tackles the issues of the larger businesses – and these are the ones shedding the jobs. Without helping larger businesses on business rates, the silent majority is side-lined yet again.”

Helen Dickinson, chief executive of the British Retail Consortium, said: “The Chancellor has shown he is capable of making bold decisions, this will be critical to the upcoming review of the broken business rate system. We welcome the stated objectives of reducing the rates burden on business, something we have been calling for, and the inclusion of changes to transitional relief as an option to provide short-term relief from April 2021.

“It is vital that the burden is reduced for all retailers – large and small – if it is to promote further investment in productivity growth and higher-skilled, better-paid jobs. We hope this open-minded approach carries through to implementing positive changes once the review has concluded later this year.”

Elsewhere in the budget, a new Plastics Packaging Tax was announced to tackle excessive plastic waste. From April 2022, manufacturers and importers will be charged 200 pounds per tonne on packaging made of less than 30 percent recycled plastic. That will increase the use of recycled plastic in packaging by 40 percent - equal to carbon savings of nearly 200,000 tonnes, the government estimates.

Sunak also announced there would be statutory sick pay for those needing to self-isolate due to coronavirus. Businesses with fewer than 250 employees will be able to reclaim the cost of providing the pay to any employee off work due to coronavirus. Sunak said that could provide over 2 billion pounds for up to 2 million small businesses.

Additionally, the National Living Wage will increase to 10.50 pound per hour by 2024. In the next four weeks, the National Insurance threshold will rise from 8,632 pounds to 9,500 pounds.

Photo credit: Pexels, Dominika Gregušová