Autumn statement 2023 - for hospitality and retail
There are enough of these Autumn Statements going round so we’re going to keep this one short and focussed on hospitality & retail.
The chancellor unveiled his autumn statement yesterday – we were concerned that hospitality and retail could take a bit of a battering but, on reflection, the statement was about as good as could be hoped for.
So what’s going on?
There were five things that were announced which will have an impact on your business
Business rates relief
National Minimum Wage increases
Capital allowances (corporation tax)
Employee national insurance rates
Business rates relief – more of the same
Hospitality and retail businesses will keep the 75% business rates relief that they are currently benefitting from for another year (to March 2025). The £110,000 cash cap remains.
Increases in the business rates multiplier for smaller sites will also be frozen for the fourth year.
So essentially not much change this year compared to last year. If you are a chain with larger sites, you will see your rates go up slightly, for everyone else it’s business as usual (until 2025 that is).
National Minimum Wage / National Living Wage
Two big changes here
limit on the NLW drops from those over 23 to those over 21
The rates increase by around 10% across all levels
Accordingto the Guardian this is going to give a pay raise to over 3 million workers come 1 April 2024 (when the change is effective from). Pay rate changes are summarised below:
National Living Wage (21and over) - £11.44 (an increase of £1.02
18-20 Year Old Rate - £8.60 (in increase of £1.11)
You don’t need me to tell you that 10% is massive – it’s the biggest increase ever –bigger in fact than when National Living Wage was first introduced, and that was painful then.
Obviously NLW increases are going to drive all your other wages up. There is a lot of planning to do, and likely alot of rebudgeting. We’ve crunched some numbers and generally we expect that whatever you are saving in business rates relief is going to be eaten up by wage increases (unless you are hitting the business rates cap in which case the increase will be in excess of these savings). And you were already getting the business rates relief so you are going to feel this one. Alcohol duty This is frozen again. And inflation looks likely tofall further, so your price rises in alcohol in the coming months should hopefully be muted. Capital allowances In previous years, you could take a portion of your fixed asset spend and offset this against your taxable profits. In more recent years t
his was temporarily increased to allow all qualifying fixed asset spend to be written offagainst your current year profits. This has now been made a permanent change. This is great news if you are planning to spend a boat load of money on capex (and you are making profits). For most businesses though, this is not much of a change as their regular fixed asset spend would havebeen caught by the original limits. Let me know if you’d like more details on this and we can discuss. Employee national insurance Employee nationalinsurance will be cut from 6 January 2024, from 12% to 10%. Financially this means nothing to businessesas it does not directly impact the costs to the business; but your staff will be takingvhome a little more than before. Overall view This statement was as positive as we were likely to see. NLW increases are going t
o hurt, however now is the time to plan on what you are doing next year with your staffing, overheads and prices.
The OBR forecasts for next year are painting a relatively flat picture, with inflation fallingfurther than the current 4.8%. So if we want to take a positive view here; the economy will not get worse and there should be a bit more money in peoples pockets due to wage increases and NI reductions.
There is also data suggesting that consumers have now adjusted to price increases so there may well be scope in 2024 to increase prices further to offset the 10% wage increases (if all else remains equal, a 2.5% price increase should cover this uplift in wages).
As supplier prices level out, the new year could be a great time to look at your suppliers contracts, especially utilities, merchant services and alcohol costs. There are some great brokers out there whocan look into this for you, drop me a line if you would like us to put you intouch with anyone. What does the spring budget hold? We have already seen people talking about lobbying for a hospitality VAT cut in time for the spring budget. In our view that is very unlikely to happen – the cost to the treasury is astronomical and, lets behonest, it’s not a vote winner and that is what is going to count in a budget with an election looming. So this is your lot – work with
what you’ve got.
And don’t forget the changes in Tip legislation which should be coming into force next year. If you collect tips or service charges, then you need to plan for what changes you need to make (likely coming into force in April 2024).