Nov 2022 - Autumn Statement - for hospitality & retail

We update our clients on things that will impact them - see below our Autumn Statement (2022) update for hospitality and retail

Yesterday's Autumn statement has already been dismissed by industry bodies as 'nowhere near enough' to support the industry. In the context of a long and

deep recession, which is what we are likely to see, it is not really a surprise that significant support was not forthcoming. Gone are the days of COVID budgets where tax cuts were plentiful, it's back to business as normal it seems.

So what are the biggest impacts for you - we have summarised the policy announcements which will impact the retail and hospitality sector. As always, we're going from the items that have the biggest impact to the smallest.

National Living Wage The NLW / NMW rates are set to increase by around 9.7% in April 2023, with an increase to £10.42 for those over 23 and an increase to £10.18 for those between 21-22. Putt

ing this into the context of a salary, this means the minimum salary for someone (23+) on a 40 hour contract is £21,673. If you have 48 contracts the minimum salary would be £26,000.

As we all know, this increase is likely going to bake-in a large cost increase to wages, as those who are currently above the new NLW rate will demand increases to maintain their current differential. We are expecting wages to increase between 8% - 11%. This will result in a 3% increase in wage margins if prices & sales do not move.

Business rates

Business rates revaluation will go ahead next year which will result in the valuation of properties increasing and ultimately the cost of business rates going up. However some good news for hospitality and leisure here. The current business rates discount of 50% is being extended a further year and increased to 75%. The cap will remain at £110,000 per company, but for most this will result in paying less for your business rates in the coming year. In addition, transitional reliefs will be available for smaller businesses which means business rates will not increase substantially in the coming years (except of course, the large increase that will be felt in 2024 when the rates discount is eventually removed).

Employers National Insurance No change in the headline rates of Employers National insurance of 13.8%, and the social care levy remains scrapped. However the rate at which you pay ERs NI will remain fixed, despite a 9.7% increase in National Living wage. As a result you can expect your NI & Pension bill to increase between 8% - 11% in the coming year.

Energy bill support This is set to end for businesses on 31 March 2023. The Government are reviewing the extension of the scheme, noting that some businesses will require support beyond the current scheme. It is hoped that hospitality will be included in the extension.

Economic outlook

The budget papers contain quite a lot on economic forecasts - this is something we do not normally delve into in these updates, but thought this time it was useful.

The country is already in recession and we can expect this to continue throughout 2023. Prices are rising faster than earning so household disposable income is expected to fall by 4% in 2023 and 2% in 2024. The country currently has more open vacancies than people on the unemployment list and although unemployment is expected to increase in the coming 12-18 months, it will not increase significantly. Staffing availability is going to remain a problem and the government has indicated in the budget there are no current plans to change the migration levels.

In some slightly positive news, inflation is expected to slow next year and return to more normal levels in 2024, with negative inflation expected in 2025. Much of this is based on a reduction in fuel and energy prices.

Corporation tax

Just a reminder that the headline tax of corporation tax is going up to 25% for all businesses with profits of £250k or more. Profits between £50k and £250k will be charged on a sliding scale and we would expect most clients to fall between a tax rate for 20% to 23%

Conclusion

Overall, we're expecting a tough 2023.

Controlling all costs will need to be a focus for all businesses, especially labour. However significant focus needs to be on protecting sales and working out how you can keep your customers coming back in the face of falling consumer spending power.

The above is only a summary of what was co

ntained in the budget and misses out quite of lot of taxation changes (R&D tax relief change, Capital Gains Tax changes, further degradation of Dividend allowances etc).

If you have any specific questions you would like to discuss, please drop us a line.

Also, if you would like to talk about cost control and the support we can provide from our end on this, let me know and we can chat through.