Chancellor of the Exchequer Kwasi Kwarteng 's mini-budget slammed the pound but the reaction was more nuanced among the hospitality and retail sectors.
Measures included corporation tax staying at 19%, as opposed to the 25% increase originally planned for April, bankers’ bonuses being scrapped and VAT-free shopping for overseas investors as well as a cancelling of planned increases in duties for alcohol.
Hospitality
According to James Brumby, an analyst at hospitality advisory firm Langton Capital, the general tone among the sector is that while it is appreciated, much more is needed.
“Specifically, there were no mention VAT cuts for hospitality or business rates relief, which would have been appreciated, though costly to the Exchequer,” said Brumby.
This is a view echoed by Kate Nicholls, chief executive of UKHospitality, a trade body which represents over 740 companies.
NIcholls argues that while the objectives rightly put businesses at the heart of the government’s agenda of boosting growth and tackling inflation, Kwarteng overlooked two obvious levers to achieve that, VAT and business rates relief.
“Our VAT rate is the highest in Europe, which is starkly at odds with ambitions for global tax competitiveness and will hopefully be addressed in the autumn budget, if not before,” Nicholls added.
While she welcomes tax-free shopping for overseas customers, it would have been far more helpful and impactful to lower VAT for domestic customers.
Most of the hospitalities relief, of course, came with the announcement on Wednesday of energy bills being halved.
Retail
For retail, the picture is slightly rosier to those within the sector.
The west-end particularly welcomed VAT-free shopping for oversea tourists, meaning London doesn’t lose any tourism to Milan and Paris, for example, although it is unclear exactly how this will benefit businesses in less popular travel destinations across the country.
Dee Corsi, interim CEO at business group New West End Company, a management consultancy, said in the Standard, “Today’s decision to reintroduce tax-free shopping for overseas visitors is a great victory for London’s International Centres.”
“Now the West End can compete on a level playing field with Paris, Milan and Madrid as one of the world’s top shopping and leisure destinations.”
“The return of VAT-free shopping for tourists increases London’s competitiveness when it comes to attracting the spending power of international visitors,” said Lina Ellet, UK head of consumer markets, retail and leisure at consultants KPMG, also in the Standard.
Now the question is, according to Julie Palmer, a partner at corporate restructuring firm Begbies Traynor (AIM:BEG), whether “it will make people feel as if they don’t need to panic about tightening their own purses.”
Key for retailers, along with some of the tax breaks, is actually still trying to get people to spend their money in their stores once most of the measures kick in come April.
Shares in some of the industry's big hitters were down, with JD Sports Fashion PLC (LSE:JD.) and Next PLC (LSE:NXT) down 4%, while JD Wetherspoon PLC (LSE:JDW) and Fuller, Smith & Turner PLC were both down 2%.