The chancellor needs to do more to restore economic optimism

This Budget has been aimed at controlling inflation and growing the economy. Chancellor Hunt is smart enough to recognise that strong economic credentials cannot be built on shifting sands, which is why last year he went out of his way to reassure the markets that inflation reduction and fiscal rectitude comes first. But he also knows that he will never get the growth that the British economy needs without making it worthwhile to invest.

The government wants to showcase the UK as a business-friendly environment, where both taxes and regulations are kept as low as possible and enterprise is rewarded. Some of these Budget measures help to paint this picture, such as introduction of full capital expensing for the next three years. But when the headlines have disappeared, many of us in business are going to find in practice that higher taxes confront us wherever we turn.

The freezing of income tax thresholds, the rise in corporation tax from 19p to 25p, and the cutting of the dividend and capital gains tax allowances, send the wrong signals to investors. It is hard to escape the truth that they are all about getting money into the Exchequer, rather than incentivising investment in UK plc. The same, regrettably, goes for business rates, which are now set so high that they are in danger of cannibalising their own tax base.

The uniform business rate has risen from 34p in the pound when it was first introduced in 1990 to 51p in the pound today. It is not surprising that shops, which are having to carry a heavier tax burden on mere existence than ever before, are unable to compete in many instances with their online counterparts. Of course, the sensible response from retailers is to  multi-channel, but any presence on the high street carries an acute tax burden.

High business rates have contributed to an acceleration in shop closures and job losses in recent years. The Centre for Retail Research has found that that more than 17,000 shops closed in 2022, equivalent to 47 a day, the highest total in five years. More than 5% of retail staff (150,000 people) lost their jobs last year through insolvencies and store closures arising from rationalisation, and most of them were women.

The Conservatives acknowledged the need to reduce business rates in their 2019 manifesto. But they have failed to treat this reduction as a priority and the uniform business rate remains at its highest ever level at 51p. Everyone knows that at 51p the business rates system remains unsustainable – which is why the Labour Party have been bold enough to announce that, if elected, they would abolish business rates and replace them with “a system that is fit for the 21^st century”.

The business rates system can yet be saved, along with the fate of many retailers. The Shopkeepers Campaign will be working with both political parties in the year ahead to persuade them to commit to fundamental reform. For example, I would like to see the government stimulate greater investment in upgrading retail premises by extending the period over which empty property relief could be claimed from three to 12 months. This would help many retailers reach the EPC rating standards required of them, as well as ensuring that they are future fit  for modern retail expectations .

Investor confidence in bricks and mortar retail could be further bolstered by progressive annual reductions in the uniform business rate (UBR), towards a target UBR of 30p in the pound by the time of the implementation of the next ratings list in 2026. These would be practical measures to promote business investment.

Only when the new investment arrives will economic optimism return. On that, hangs the political fate of this government.