Autumn Budget: Reeves must avoid tax encore for retail, HMV boss warns
Ahead of the Autumn Budget, City Reporter Samuel Norman sits down with top industry names for a Budget Briefing. This week, chief executive of HMV joins a chorus of warnings to give the retail sector some reprieve.
As high street music retailer HMV breezes into the all-important golden quarter, boss Phillip Halliday is eyeing a chart-topper that won’t come from Wham or Mariah Carey this year.
With the delayed Budget dropping less than a month before the festive rush, Chancellor Rachel Reeves is under pressure to help the retail industry enter the new year on a high note.
“We’re having a good year,” Halliday tells City PM, “so we’re slightly better positioned to handle that delay than we might have been in other years”.
The high street boss recalls “hesitancy” around 2024, where the retail sector was slapped with a double whammy of a hike to employer’s national insurance contributions (NICs) and an increase to the minimum wage.
But now Halliday has sent out a warning shot for Reeves to change the tune in her second Budget.
“It’s not rocket science with what they do,” he says.
“We definitely already overpay in terms of the tax burden on retail and that is sort of common knowledge.”
Halliday adds the Treasury should be looking at “where they have applied pressure” and adopt the “sensible approach” to focus on other areas.
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Business rates on blast
Business rates topped the agenda for levers Halliday was hoping Reeves would consider pulling to provide a boost to the retail industry.
“It’s been so cumbersome for so long that it needs to be addressed,” he says.
“You can’t do anything about your business rates… there’s nothing you can do about it, it’s just a fixed cost that is imposed on you.”
Halliday says business rates are dampening investments through triggering “unnecessarily high revenue targets” that “you wince a little when you see”.
The tax is calculated by taking a property’s rateable value – an estimate of the unit’s open market annual rent – and combining it with a flat business rates ‘multiplier’. It is slapped on shops, offices and warehouses across the country.
Legislation working its way through Parliament will introduce a higher multiplier for properties worth over £500,000 to pay for a lower figure for small sites and retail, leisure and hospitality businesses.
The new multipliers are set to be announced in the upcoming Autumn budget.
While there would be little change for small businesses currently benefitting from rates relief and a bigger bill for businesses with multiple ‘anchor’ stores, mid-sized firms like HMV are likely to end up in a good spot.
Halliday says Reeves’ forthcoming changes to large properties would be “critical” but hoped HMV could capture some reprieve in changes to retail rates.
VAT threat
As well as business rates, come 26 November Halliday will be keeping an eye on changes to the minimum wage and VAT.
The Chancellor refused to rule out fresh VAT rises ahead of her speech at the Labour Party conference last month.
Asked whether Brits could face increases to the retail levy, Reeves ducked the question, pointing to her promise to not raise headline personal taxes on working people, including VAT.
Reeves added: “If you look at my record, at the budget last year lots of people said we would have to break manifesto commitments, to renege on them. And I didn’t.”
Such a move could spark fierce political backlash after Labour committed to not raise taxes on working people – with increases to VAT, national insurance and income tax – in its 2024 election manifesto.
“A VAT change would be horrible,” Halliday says
Top retail heavyweights, including Sainsbury’s, John Lewis and Tesco, warned Reeves’ tax policies could force price hikes due to mounting costs.
The industry has also braced for changes to the national minimum wage – a move which Halliday says would be “very difficult”.
Reeves is reportedly set to confirm a rise in the National Living Wage at the Budget by as much as four per cent.
The move would mark another blow after the dual-hit of employer’s NICs and minimum wage last year.
A fresh change would see employers have to raise workers’ wages from £12.21 to at least £12.70 an hour, sending ripples across the private sector and jobs market.
Getting high streets ‘working again’
HMV went into administration for the second time in six years in December 2018, as the company cited a “tsunami of challenges” including rising business rates and the shift to digital streaming.
The high street retailer was rescued in February 2019 by Doug Putman, the owner of Canadian record retailer Sunrise Records.
The business has nearly 120 stores across the UK.
Reeves’ second budget comes at a crucial time for the UK’s high streets as mounting financial burdens and the rise of online retail weigh on firms’ books.
Earlier this year, WH Smith agreed to sell its 233-year-old high street business to Modella Capital for around £76m.
Halliday emphasises the “importance” of getting high streets “working again” – whether that be hospitality, cafes or stores.
“Some of the worst damage has been done,” he says.
But he adds boosting jobs for the “committed local people” in that area would coincide with making the high streets a top attraction to visit again.
“They do need a hand and it is important because they’re probably not that interested in the country’s AI strategy.
“There are people in a lot of places that don’t really relate to and a number of jobs that those levels of strategies have created are not a lot.”