Budget 2012: Retailers gain on Sunday trading but lose on fuel
When it comes to retail, the Chancellor giveth and the Chancellor taketh away.
Retailers have been given a boost in this year's Budget with the relaxation of Sunday trading restrictions during the Olympics, but will be miffed that the long-campaigned-for cut in fuel duty did not materialise and perplexed by some tinkering with VAT.
Retailers will be given a leg up, albeit a temporary one, during the Olympic period when restrictions on Sunday trading will be relaxed to allow large shops to remain open longer than the currently-allowed six hours. The change will apply for eight weekends from 22 July.
Osborne said it would be "a great shame" if people from around the world came to Britain for the Olympics only to find a "closed for business sign" on the door.
John Cridland, director general of the Confederation of British Industry, told Sky's 'Murnaghan' programme: "I think there is a big difference between a temporary measure to try and lock in some of the spending of the thousands and thousands of international visitors who will come to Britain during the Olympics on a Sunday and a permanent change.
"If it is a permanent change we would need to consult a lot of people, the shops themselves and the workers in those shops, but a temporary change just for the Olympics - every little helps."
A spokesperson for Marks and Spencer said: "We recognise that the Olympics is a once-in-a-lifetime event and we would be keen to take advantage of this change." The company chose not to comment further, saying M&S does not comment on political decisions.
British Retail Consortium director general Stephen Robertson raised concerns that business rates were not addressed by the Chancellor:
"It's very disappointing that the Chancellor has done nothing to scale back the impending 5.6% increase which will add £350 million to retailers' costs."
Foolish fuel tax
In Wednesday's Budget, Osborne also said that he would go ahead with the 3.02p per litre increase in fuel duty due to take effect on 1 August. However, he promised not to raise the tax above inflation as long as oil prices remain above £45 a barrel, an unlikely event with the current price around £79.
Since transport costs make up a considerable proportion of retailers' costs, profits could be hit or companies forced to raise prices if fuel costs continue to rise as they have been in recent years, driven by oil prices.
Chief executive of the Road Haulage Association (RHA) Geoff Dunning said: "The RHA's weekly fuel price survey last week hit an all-time record high - and yet the Chancellor will be driving costs up by another £1,200 a year for a large truck - costs that hauliers must now set about trying to recover from their hard-pressed customers."
The freezing of vehicle excise duty for hauliers - effectively a cut when inflation is taken into consideration - will go some way to easing concerns, possibly relaxing pressure on transport prices.
This article was written for our sister website Interactive Investor
Invented by a Frenchman in 1954 and ironically introduced in the UK on 1 April 1973, VAT is an indirect tax levied on the value added in the production of goods and services, from primary production to final consumption and is paid by the buyer. Its levying is complex, with a number of exemptions and exclusions. For example, in the UK, VAT is payable on chocolate-covered biscuits, but not on chocolate-covered cakes and the non-VAT status of McVitie’s Jaffa Cakes was challenged in a UK court case to determine whether Jaffa Cake was a cake or a biscuit. The judge ruled that the Jaffa Cake is a cake, McVitie’s won the case and VAT is not paid on Jaffa Cakes in the UK.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
Confederation of British Industry
The CBI promotes the interests of its members, some 200,000 British businesses, a figure that includes 80% of FTSE 100 companies and around 50% of FTSE 350 companies. Formed in 1965, it’s the lobbying organisation for UK business on national and international issues and seeks to influence the UK government to help businesses compete effectively.