Amid warnings of rising pressures on consumers due to global post-Covid inflation, Chancellor Rishi Sunak this afternoon unveiled a policy-packed budget.

Given leeway by the Office of Budget Responsibility upgrading 2021 growth forecasts, there were a number of eye-catching spending pledges. But for the grocery industry, the major talking points were the changes to business rates and an overhaul of alcohol duty.

Business rates

Sunak resisted calls to completely overhaul the controversial tax – noting its £25bn contribution to UK coffers each year – but did promise to make it “fairer and timelier” and cut the burden by £7bn.

Most notably, the chancellor announced a 50% discount for businesses in the retail, hospitality and leisure sectors for one year, up to a maximum of £110k. The cut, worth almost £1.7bn, will mean over 90% of businesses in these sectors will see a 50% drop in their business rates, taken together with existing small business rates relief.

The most costly measure is freezing the multiplier for calculating rates for 2022 and 2023, which is worth £4.6bn over the next five years.

Additionally, rates revaluations will take place every three years from 2023, rather than every five years before the postponement of the last round from 2015 to 2017 and extension of the current round to 2023.

Furthermore, a new relief on the tax will be brought in to encourage investment in green tech, such as solar panels. Companies making these improvements will be exempt from additional charges for 12 months.

While the changes will be welcomed, the measures fall well short of the wholesale reform of the business rates regime called for by bodies like the British Retail Consortium.

“This falls far short of a fundamental review,” said Jace Tyrrell, CEO of the New West End Company. “This simply doesn’t meet the government’s manifesto commitment to reduce the burden of business rates.”

The treasury will continue to review arguments for an online sales tax to reduce the burden on bricks-and-mortar businesses.

Alcohol duty

Sunak announced a more drastic reform of the UK’s “outdated and complex” alcohol duty regime, promising to make it “simpler, fairer and healthier”.

The chancellor will reduce the number of duty rates from 15 to six, based around the principle of stronger-abv drinks attracting a higher rate of taxation. The move effectively means that fruit ciders, low-strength beers and wines will become less expensive, while higher-abv ciders and red wines will attract additional tax.

Meanwhile, he will end the “irrational” 28% duty on sparkling wines and champagnes.

Elsewhere, Sunak promised to encourage craft producers, with small brewers relief extended to cider makers and other producers of drinks 8.5% abv and lower.

For pubs, a new lower rate of duty on draught beer and cider (from barrels of over 40 litres) will be introduced to support the on-trade. The new rate will be 5% lower and save drinkers 3p per pint in the biggest cut to beer duty for 50 years.

Finally, the planned increase in duties on scotch, wine cider and beer will all be cancelled, saving the industry £3bn.

Wine Drinkers UK welcomed the “long overdue decision to abandon the ‘super-tax’ on sparkling wines”, while shares in pub groups were up on the news, with JD Wetherspoon up 5.7% to 1,043.4p, Mitchells & Butlers up 6.2% to 262p and Marston’s up 5.4% to 80.8p.

Other highlights

  • A 6.6% rise in the national minimum wage to £9.50 a hour for two million workers
  • Planned rise in fuel duty cancelled
  • HGV levy suspended until 2023 and VED frozen for heavy goods vehicles
  • UK R&D tax relief of £48bn will be refocused on UK-located businesses that currently receive investment of £22bn
  • Inflation to “rise further” from current level of 3.1% to peak at around 4% in early 2022
  • Permanent “scarring” on economy from Covid reduced to 2% from 3%, while the economy will grow back to pre-Covid levels by the turn of the year and growth in 2021 upgraded to 6.5% from 4%, while 2022 is downgraded to 6% from 7.3%.

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