“The timing and execution of this Budget remains a significant challenge for the retail industry. While there were no major surprises this year, consumer and business confidence—already unsettled by weeks of speculation—remains low. But how this plays out as we head into Black Friday and peak trading is likely to be quite different, depending on sector and customer demographic.
“Consumers face a very mixed picture. Lower-income consumers, especially those on welfare, will feel most positive and therefore more willing to part with their money, while middle- and higher-income consumers will feel more reluctant as they navigate the effects of the freeze on tax thresholds, the cap on salary-sacrifice pension contributions and the smorgasbord of additional tax increases. As a result, retailers are likely to see a differentiated response in discretionary spending based on their target customer: value-led retailers may see an uptick in sales, while those in the more premium space could see a dip—which is a particular challenge with Black Friday imminent.
“From a retailer perspective, it was a relief that most of today’s measures were heavily anticipated: ‘no surprise’ being a good outcome. Small store retailers will welcome the drop in business rates, although the additional business rates on large stores will hit supermarkets and anchor stores in malls. As many large-store retail businesses tend to operate with lower margins, this could lead to closures and further impact on footfall where those stores exist. Additionally, the slightly unexpected 8% increase in the youth National Living Wage will cause all retailers to reconsider whether they hire younger employees, who make up a significant portion of the workforce--especially given the impact of the Employment Rights Bill. Retailers may find themselves accelerating automation options, with fewer younger people finding their first job in the sector as a result.”