Tax and training reforms vital to safeguard UK's £352bn retail industry, says CBI

Urgent reforms to the UK’s outdated Business Rates system and inflexible Apprenticeship Levy are essential to support a retail and wholesale industry which underpins economic activity in every town and city across the country.

New research by CBI Economics, conducted on behalf of the CBI and its retail members, reveals retail and wholesale activity is now worth £352billion a year to the UK economy. It supports one in five of the nation’s jobs, with 5.7 million people employed within the sector or its suppliers.

Data shows 20% of UK constituencies are heavily reliant upon the sector’s economic contribution for more than a fifth of their GVA and employment. This adds substantial benefits to the public purse too, with the £50billion retailers and wholesalers pay in taxes enough to fund 110 new hospitals a year.

Yet the fallout from Covid and war in Ukraine continues to weigh heavily on the sector, and an inflation-linked 10% Business Rates hike due in the spring risks plunging many firms into a fight for survival. A slow revaluations system also means retailers and wholesalers are already overpaying, with many facing liabilities as high as rents.

That is why the CBI – supported by the British Retail Consortium (BRC) – is urging Government to both rethink the planned rise and implement longer term reforms which reward investment.

The CBI is also keen to see greater flexibility in the Apprenticeship Levy, a move which could have an enormous impact on a sector which already spends £4billion a year on training. This amounts to a tenth of all training spend in the UK.

Together, these measures could generate renewed optimism and investment in a sector which plays a vital role in communities, the wider economy and the growth prospects for UK plc.

Matthew Fell, CBI Chief Policy Director, said:

“Retail and wholesale businesses have remained at the epicentre of every economic ecosystem in the UK throughout the crises of the pandemic, war in Ukraine, supply chain disruption and surging costs. The sector has often been the first line of defence during these economic headwinds, and continues to prioritise supporting households, as well as their employees, through these challenges.

“With economic growth now a national imperative, the industry is once again leading the charge. Retailers and wholesalers continue to invest heavily in training their employees; they not only decarbonise their own operations, but help their customers reduce their carbon footprint too; and they’re levelling-up in action, as anchor points on British high streets.

“Amid unprecedented levels of inflation and a cost-of-living crisis, it has never been more important to have retail and wholesale firing on all cylinders.

“That is why we are asking Government to smooth the looming Business Rates cliff edge; without intervention, the eye-watering rises scheduled for April will present an existential threat for many businesses which communities depend on. Longer-term reforms which encourage investment and fresh thinking on the Apprenticeship Levy can help future-proof the sector and spur further growth.

“While this is a fragile moment for the economy, and the immediate focus is rightly on restoring macroeconomic stability, there is real ambition within retail and wholesale to help unlock the huge growth opportunities for UK businesses. They know the right actions now mean we can look forward to a 2023 of promise, potential and prosperity.”

Mohammad Jamei, Director of CBI Economics, said:

“The retail and wholesale sector has undergone significant change over the recent decade and is on the cusp of digital transformation. It has also been a key sector delivering for its customers and its employees throughout the challenging times of recent years.

“The sector therefore has a lot to contribute both in overcoming short-term challenges and in creating future economic opportunity; driving technological advancements to keep ahead of consumer need, and creating transferrable digital skills to safeguard employees’ future and enable their progression.

“As such, we were pleased to work with businesses in the sector to build the evidence around the myriad ways they contribute to the economy, to society and to local communities. We are excited to share our findings today and we hope it kick-starts open and constructive conversations between business and government on how to work together to ride out the difficult times ahead and create long-term prosperity.”

Helen Dickinson, Chief Executive of the British Retail Consortium, said:

“Retail touches every community every day, providing us all with the goods we want and need. As the largest private sector employer in the UK, supporting jobs in every corner of the country, the success of the industry matters. We have a world-leading, innovative and resilient retail industry we can all be proud of, and it needs to right environment to thrive.

“High global commodity costs, a weak pound, and tight labour market are driving up prices for consumers at a time when they are already facing higher bills and mortgage payments. Unless action is taken, retailers face an additional £800m in business rates every year from 2023. This is money that better spent keeping prices low and supporting local communities. Government should drive investment and protect customers by freezing or limiting this rates increase, and ensure retailers pay no more than they owe in rates by reforming the broken transitional relief system.

“Government should also reform the Apprenticeship Levy. Currently, hundreds of thousands of pounds are wasted every month, meaning missed employment opportunities, missed training, and missed career progression. The industry needs a higher skilled, more productive, and better paid workforce but this broken system is holding this back. Government must make the Levy more flexible so retailers can use the funds for high quality pre-employment courses, short in-work developmental courses and to cover other costs related to training their people.”