Insights

Autumn 2024 Budget: The THREE main take aways for the Retail, Hospitality and Leisure Sectors

6/11/2024

The 2024 Autumn Budget was intended to bolster the UK economy. We will look at the three main ways in which it will impact the Retail, Hospitality and Leisure (RHL) sectors.

These sectors, some of the most vital to the UK’s economic and social fabric, are still recovering from the pandemic’s prolonged impact, and they now additionally face ongoing pressures from high inflation, rising wages, and the enduring shift towards online shopping. Will the budget work?

1. Minimum wage hike

One of the most notable changes in the Autumn 2024 Budget is the increase in the National Minimum Wage (NMW). This hike is expected to have a profound impact on the RHL sector, where many employees are paid at or near the minimum wage.

The wage increase will raise operational costs for businesses, potentially squeezing profit margins. Employers may face challenges in maintaining pay differentials, which could affect staff morale and retention. Whilst the wage hike will benefit employees by increasing their earnings, it may also lead to reduced hours or job cuts as businesses adjust to higher costs.

The plan to eliminate the NMW age-bands, ensuring all adults receive the same pay, raises additional issues for businesses. It may deter businesses from hiring younger workers, who are often seen as less experienced.

2. Employer National Insurance Contribution Increase

The budget includes an increase in employer National Insurance contributions to 15%, which will further affect the RHL sector. This will increase employers' financial burden, particularly for SMEs which dominate the RHL sector and could potentially lead to cost-cutting measures, including layoffs or reduced hiring.

The reduction of the Employment Allowance threshold to £5,000 means employers will now have to pay National Insurance for employees earning as little as £100 per week. This change will affect many casual and low-hours workers, raising costs for businesses that depend on flexible staffing.

3. Business Rates Reform

Before the budget, we initiated the Reduce Retail Rates Now Campaign to support our clients in advocating for the reform of an outdated and unjust tax. Our campaign has already seen some success, and whilst we are glad to see some progress, we will continue to push for further reform.

With reference to the budget, eligible RHL properties currently benefit from a 75% discount on rates (introduced during the pandemic) which is set to end in April 2025. This relief is set to be extended from 2025-26, but RHL businesses will instead receive a 40% relief on their business rates bills, up to a £110,000 cash cap per business. Although welcomed, this reduction, effective from April 2025, represents a notable cost increase for affected businesses, many of which had hoped for more extended or greater relief. 

Another change is the plans to introduce two permanently lower tax rates for RHL properties. This reform is designed to support high streets and local economies by making it more affordable for businesses to operate. However, these lower rates do not come into play until 2026-27. 

This change will be financed by applying a higher multiplier to the most valuable properties, those with a rateable value of £500,000 and above, which will capture distribution warehouses used by major online retailers. While this is a positive step, it will also impact many large RHL businesses that play a crucial role in drawing shoppers to the high street. Therefore, for many businesses it still does not change the fundamental unfairness of having to compete with online companies, who often employ fewer staff compared to traditional bricks-and-mortar businesses, and as a result, no high streets are maintained.

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For many businesses it still does not change the fundamental unfairness of having to compete with online companies, who often employ fewer staff compared to traditional bricks-and-mortar businesses, and as a result, no high streets are maintained.

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