Budget 2015 #3: Supplier and Other Comment

IGD chief economist James Walton said: “It was generally very positive messaging from the Chancellor, as one might expect with the election now just a few weeks away.”  

As might be expected, much of the comment focussed on duty.

On tobacco tax, Daniel Torras, MD of JTI in the UK said: “The Government’s own figures show that tobacco smuggling has increased for the last two years, losing £2.1bn in revenue. With a ban on smaller packs of cigarettes and rolling tobacco on the horizon, along with plain packaging, now is not the time to increase tax on tobacco which will widen the price between legitimate and illegal products.”

Drinks manufacturers were a good deal happier with the freezes (and in some cases cuts) on duty on beer, wines and spirits.

“We are delighted that the Government has confirmed a 2% cut in duty for spirits,” said Pernod Ricard UK MD Denis O’Flynn. “This small drop in duty is an important contribution in supporting jobs, growth and investment in the UK spirits industry.

“While it is disappointing that the UK’s 30 million wine consumers did not receive a duty cut as well, we are pleased that the Chancellor has chosen to freeze wine duty at its current rate.  This is certainly an improvement and a good first step.”

Andrew Cowan, MD of Diageo Great Britain, added: “Thousands of people across the nation will this evening raise a happy toast to the Chancellor. The alcohol industry generates billions for the economy and flies the flag for the UK abroad. This cut will mean that a 400 year historic industry like Scotch whisky will remain a crucial, and vibrant, part of the British economy for many more years to come.”

Miles Beale, CEO of the Wine amp; Sprits Association commented: “This small drop in duty will result in a big cheer for the UK’s 24m spirit consumers. We are grateful to those MPs who listened to their constituents and supported our campaign and hope that all parties are able to support the measures outlined today and build on them in the next Parliament.

“We campaigned for a cut in duty across all products and are disappointed that the UK’s 30m wine consumers did not receive a duty cut too. But freezing wine duty is an improvement and a first step towards supporting wine businesses that are looking to invest in the UK, create jobs and back British pubs.”

Phil Mullis, retail accountant at “top-20″ accountancy firm, Wilkins Kennedy LLP,

said that reforms to Business Rates would mean that more independent retailers should be better off, but added a note of caution: “is impossible to tell what effect this will have on business generally and it is a risk for the Exchequer as business rates bring in more than £20bn every year – where will this funding be made up?

Small shops are actually 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. With the rates relief in place, this will allow some independents to expand, or even leave some extra cash spare for investment in technology or staff training.

Only time will tell if this will mean success or failure for retailers on the high street as no one could possible know. Watch this space.”

On Employers NI contributions and the rise in minimum wage, he commented:

“Providing relief on National Insurance contributions could encourage retailers and wholesalers to employ more young people. However, with minimum wage increases on the horizon in October to £6.70, could this be enough to support independent stores in to hiring and retaining more staff?

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“The recession brought with it a savvier shopper who knows how to get the right price for the right product and this is something they’re reluctant to let go, despite having more money to spend. But, there is an imbalance occurring as suppliers can be squeezed by larger stores who use their purchasing power to keep the costs low – something which wholesalers operating on thin margins and independent retailers don’t have and they risk losing out on the market share.

“Customers still expect to find a bargain and prices are coming down. Even with larger purchases, they may still wait to make the purchases at the lowest possible price, putting pressure on the retailer to keep prices as low as ever.

“The larger stores have the upper hand in this respect as they have higher profit margins as well as more clout to put the pressure on their suppliers to keep their prices low and pass these savings on to their customers.

“But, all is not lost, as at least for independents they can rest assured that only a sustained period of low CPI will enable bigger ticket purchases – and what goes up must come down.

The [wholesale channel]should sit tight and ride the storm continues. Utilise online store and focus on your local area as well as your target offering – independent retailers and caterers rely on their networks so when the low rate of inflation is done and dusted, this will still remain after rates rise again.”

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