Chancellor Rishi Sunak made his Spring Statement on Wednesday 23rd March 2022 against a backdrop of the Ukrainian conflict, Russian sanctions, post-pandemic uncertainty and the highest rate of inflation in 30 years.
The budget’s ‘little brother’ has arguably received more attention than usual amongst the press and general populace due to the ever-growing impact of rising fuel, food and energy prices that has made a very visible impact on both business and household budgets.
The Government’s main headline policies from the statement were as follows;
- Cutting fuel duty on petrol and diesel by 5p per litre for 12 months
- Increasing the Employment Allowance from £4,000 to £5,000
- Bringing forward an exemption on business rates for green technology
- Reforming R&D tax credits to help drive innovation
- No current changes to its already planned business rates relief
So, how will this affect your business and more specifically the ecommerce industry?
As always, it’s important to take into account both how this may impact your business’ ongoing costs and, in turn, look at how it could affect your consumers’ expendable income.
Cutting fuel duty on petrol and diesel by 5p per litre for 12 months
The policy that has received the most attention has been the cut of fuel duty by 5p for 12 months. Although this makes an eye-catching, easy to understand headline, will this benefit be passed down to commuters at the pump and, importantly, the world of ecommerce through couriers and haulage firms?
With the price of fuel riding the wave of a volatile few years, from 106p per litre during the first lockdown up to its current 167p per litre, a 5p reduction in duty has been called by many haulage bosses as a “drop in the ocean”, and with many motorists reporting that the pumps in their towns and cities did not decrease in price at all at the time of the introduction (6pm 23rd March 2021) it looks as though that may be the case, as prices continue to soar amongst the uncertainty of Russian sanctions.
Unfortunately, like with any negotiation, a shortage of a wholesale product does not offer the buyer the best hand in negotiating a rate. If you were considering moving your fulfilment or haulage provider, now may not be the best time to do so. Instead, rely on the loyalty you have built up with firms/partners in the hope they offer as steady of a deal as possible. This advice could also be true of your business’s energy needs and is also the advice that many financial experts are passing on to households regarding their residential energy providers.
Increasing the Employment Allowance from £4,000 to £5,000
If you are a small business and have employees, then you will certainly benefit from the rise in the Employment Allowance by £1,000, this means that you’ll pay less employers’ Class 1 National Insurance on your payroll – a tax cut worth up to £1,000 for half a million small firms.
The treasury estimate that 670,000 businesses will not pay NICs and the Health and Social Care Levy due to this Employment Allowance due to their contributions not totalling more than the £5,000 allowance.
However, it is important to remember the 1.25 percent increase in National Insurance Contributions – the Health and Social Care Levy – for employees, meaning a decrease in take-home pay and possibly a rethink on their expendable income from their household budgeting.
This is balanced for lower earners somewhat, with the income threshold at which point people start paying National Insurance rising to £12,570 in July, which the Chancellor claims is a tax cut for employees worth over £330 a year.
Bringing forward an exemption on business rates for green technology
A green revolution seems increasingly less of a pursuit of a radical new way of life but rather a hobble towards an alternative to afford us the ability to be less dependent on Russia – or other nations which may veil themselves behind a new insular iron curtain or inflict reputational damage onto themselves to become a pariah state.
With soaring energy prices hitting both households and business premises hard, this issue may be the most important of all for a government that looks to balance the creation of green energy supplies with the necessity to maintain the volume of traditional non-renewables to keep prices down.
With prices set to rise again by the end of the year as OFGEM raises their price cap again following April’s rise, this may be the single biggest creator of hesitant consumers in the ecommerce market.
To combat this the Chancellor announced plans to scrap VAT on domestic energy-saving measures such as insulation, solar panels and heat pumps as he set out a series of measures to help find alternative ways for homes and businesses to cope with surging energy costs.
With VAT slashed from 5 percent to zero for at least 5 years it seems the right time to consider your business’s green credentials but also to start that transition to being more sustainable both in your procurement, premises and day-to-day running.
Reforming R&D tax credits to help drive innovation
Rishi Sunak was candid in his assessment of productivity and skills development in the UK as spending on enterprise fell behind the OECD average in comparison to GDP.
“Something is not working,” he told UK lawmakers.
To counteract this the Chancellor has expanded the reach of R&D (Research and Development) tax credits to include data feeds and storage, cloud computing and pure mathematics to reflect the ever-increasing importance of data-based tech to the UK economy and the need to become innovators on a global stage.
Although perhaps not at the forefront of your mind if you are a small business, it may mean that some of the providers you use decide to invest more in new technologies, skills and capital expenditures that may benefit the service you receive in the long run.
No current changes to its already planned business rates relief
Last year the government announced its business rates discount scheme for retail, hospitality and leisure establishments which starts in April 2022. This includes a 50 per cent relief on rates, down from the current 66 per cent discount which ends on 31 March.
The Spring Statement provided no new announcements on business rates, despite a review into the system being published in October 2021 in order to level the playing field for bricks and mortar businesses, particularly following the hardship of the pandemic’s restrictions.
The Chancellor did however hint towards new business rates and reforms to be revealed in the Autumn budget, alongside income tax reductions of 20p to 19p in the pound before the end of this Parliament. Many political commentators have said this is not soon enough and a case of the government playing politics to provide tax reliefs just before a general election.
It has certainly been a sobering beginning to 2022, with the rising cost of living taking its toll and many experts citing the biggest decline in the standard of living since the 1950s.
Small businesses will certainly be assessing their options, however, with GDP rising to combat inflation, it may be a good time to take stock, cut your cloth accordingly and think about making incremental and sustainable changes to your ecommerce business that could pay dividends in the long run – and see what the Budget in Autumn holds.