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Key Points from the Summer Budget

George-Osborne-3259762The Summer Budget

National living wage: what are the implications for food & drink?

George Osborne has announced a new, compulsory national living wage for everyone over the age of 25. It will come in at £7.20 in April 2016 and rise to more than £9 by 2020.

The Association of Convenience Stores warned the new living wage was “a reckless measure” that would have a bad impact on convenience stores. “The introduction of a compulsory ‘Living Wage’ will have a devastating impact on thousands of convenience stores,” said ACS chief executive James Lowman. “This will lead to retailers having to reduce staff hours, work more hours in their business and ultimately cancel their investment plans. To introduce this measure with no consultation undermines the independent Low Pay Commission and is a reckless way to impose a massive burden on small businesses.”

The British Beer and Pub Association said it was pleased to see the tax cuts in today’s budget, given the likely impact of the new living wage. “Some of the measures, such as the Living Wage and reductions in tax credits, will have a knock-on effect on the cost of employment for pubs, so the tax cuts announced today are a welcome and necessary balancing measure,” said CEO Brigid Simmonds.

The Federation of Small Businesses described the budget as “a mixed bag” for small businesses. The new living wage in particular could prove difficult, it warned. “Even though offset by a welcome increase in the employment allowance, some will find the new National Living Wage challenging,” said national chairman John Allen.

The Office for Budget Responsibility said there was “significant uncertainty” around the impact the new living wage would have. “The response of firms and the impact on the labour market are subject to significant uncertainty,” it said in its response to the budget. “We have assumed that the increased labour costs will lead to a reduction in total hours worked of around 0.4 per cent – split equally between reduced average hours and around 60,000 fewer people in employment. But we have assumed a smaller reduction in total output of around 0.1 per cent, since the reduction in hours worked will be concentrated among people earning lower wages.”

Political reactions

The Labour Party’s acting leader, Harriet Harman, said she was concerned Osborne’s living wage announcement was a case of “giving with one hand and taking away with the other”. She said “without tax credits, even the living wage is not enough for a family to live on. And when it comes to tax cuts, we support a rise in the personal allowance and the higher-rate threshold. But we will look at the detail to make sure he is not up to his usual trick of giving with one hand and taking away with the other.”

Caroline Lucas of the Green Party “cautiously welcomed” Osborne’s promise of higher wages but criticised the welfare cuts put forward in today’s budget.

Industry reactions

Phil Mullis, Head of Retail and Wholesale at top-20 accountancy firm, Wilkins Kennedy

“Small scale shops are leading growth on the high street, experiencing an 8.1% rise in sales since 2013, compared to a 2.6% rise from larger retail businesses as people’s shopping habits change. No longer are the extensive warehouse-style supermarkets catering for the time-poor shopper that needs to nip in for a quick meal after work or evensong.

“The trading hours could create a U-turn in shopper behaviour as consumers choose to shop for longer at the larger stores to benefit from lower prices over the independent convenience stores.

“The truth is, consumers can only consume so much – will we spend more because the stores are open for longer? It’s unlikely, but the chances are the independent stores will stand to lose out in the longer term.”

Julie Carlyle, Head of Retail at EY

“We live in a world where consumers demand convenience at all times and this forms part of a wider trend where consumers expect seamless flexibility across multiple channels.

”Retailers need to ensure that their opening hours are reflective of the changing demands from consumers so any move to extend opening hours on a Sunday will help retailers fulfil this need. However, this change will inevitably bring extra burden to retailers at a time when margins are already under significant pressure from the rise of discounters and online outlets.”

Dr Helen Meese, Head of Engineering in Society at the Institution of Mechanical Engineers

“There are some welcome proposals in this Budget, but Government needs to go much further if it wants to secure the country’s skills, economy and NHS.

“The introduction of the revised Vehicles Emissions Duty will help secure a sustainable method to fund the UK’s road network, the increase in the Annual Investment Allowance is a welcome legislation for SMEs and plans to increase the number of apprenticeships by 3 million via a levy to large companies could also help boost skills.

“However there is a need for Government to show clearly how it will ensure that these apprenticeships will meet the high standards needed in engineering. The Government should also look at ways companies can use this apprenticeship levy to support their supply chain and SMEs.

“The UK’s skills shortage is one of the most critical issues facing the country. Without engineers we have no hope of making the large infrastructure projects needed in the energy, transport and health sectors a reality.

Source: The Grocer, http://www.thegrocer.co.uk/home/topics/general-election-2015/summer-budget-reactions-and-analysis/521222.article

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