Luxury retailers urge tax-free shopping rethink

Leading luxury and fashion retailers have written to Rishi Sunak warning that abolishing tax-free shopping for tourists will be a “hammer blow” to the sector. With the Chancellor planning to levy 20% VAT on purchases made by international shoppers, bosses of fifteen firms – including Ted Baker, The White Company and Paul Smith – have warned that the move “is bad for business and bad for the Treasury’s coffers”. The Centre for Economics and Business Research says the Treasury could lose out if visitors opt to shop elsewhere, noting that tourists in Britain spent over £28bn last year, with £2.5bn of VAT reclaimed. It also warns that the move could cost up to 41,000 jobs.

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Finance chiefs expect slower recovery

A survey from Deloitte shows that finance chiefs believe the return to business as usual following the coronavirus crisis will take longer than they previously forecast. Over the last three months FTSE 100 and FTSE 250 chief financial officers have altered their expectations for a full recovery in business demand. At the end of June, 10% of CFOs said that demand had already returned to pre-pandemic levels, while 41% expected it to return to normal by the end of June 2019 and 49% said they thought a recovery would take longer. Although the poll at the end of September saw 18% say demand had returned to normal, the proportion expecting a return to pre-pandemic demand before next June had slipped to 21%, with 61% saying they expect it to take longer. Ian Stewart, chief economist at Deloitte, said businesses are “gearing up for a long winter … with a full recovery on the horizon only after next summer.” Suggesting that businesses expect a “longer haul back” for activity, he added that with new restrictions being rolled out, “businesses have scaled back expectations and are focused on strengthening their businesses and their balance sheets.” The poll also shows that CFOs expect to retain, on average, 82% of staff that utilised the furlough scheme; while 79% said their business was facing high or very high levels of uncertainty; and 78% felt capital expenditure would fall over the coming year, down from 86% earlier in the year.

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Firms urged to step-up Brexit preparations

The Government has launched a new “Time Is Running Out” advertising campaign telling businesses to prepare to trade on World Trade Organisation terms at the end of the Brexit transition period. The public information campaign says firms should look at a number of issues, with ministers advising UK businesses to consider whether they are ready for new customs procedures; whether they will need a visa or work permit for travel to the EU; the new immigration system; the use of personal data received from European countries; and whether any qualifications held are valid for the provision of services to EU clients. Meanwhile, HMRC is writing to 200,000 firms that trade with the EU to set out the new customs and tax rules and how to deal with them.

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Businesses call for trade deal

With trade talks seemingly stalling and the Prime Minister suggesting Britain will ready itself for a no-deal Brexit once the transition period concludes, more than 70 British business groups representing over 7m workers have called for the UK and EU to return to the negotiating table. In a joint statement, business groups including the Confederation of British Industry, TheCityUK and the British Retail Consortium said: “Now is the time for historic political leadership … With compromise and tenacity, a deal can be done.” Elsewhere, BusinessEurope, the body representing European industry, offered a similar stance, with director general Markus Beyrer saying: “An agreement is still possible, and it is the only way to avoid uncertainty and major disruption.”

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Retail shift delivers the ‘new normal’

The Times looks at how a change in shopping habits has driven a record number of retail closures, with the coronavirus lockdown accelerating a shift away from physical stores. This comes after a report from PwC and the Local Data Company showed that Britain lost 6,001 more chain stores than it gained in the first half of 2020, up from a loss of 3,509 in H1 2019. Lisa Hooker, consumer markets leader at PwC, said that while it was clear that consumers were shifting to shopping online or changing their priorities in terms of the things they buy, the coronavirus crisis has created “a step change in these underlying trends to where they have now become the new normal. ”

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Campaigners say rates system penalises the North

A number of Conservative MPs have called for a reform of business rates, saying they penalise the North. They have questioned why the rate is uniform across the country, arguing that it leaves northern stores facing a bigger rates burden. Analysis from political consultancy WPI Strategy supports the claim, highlighting that 77% of constituencies facing the highest rates burden are in the North and Midlands. The MPs, along with think-tanks Onward and the Northern Policy Foundation, are calling for an overhaul that would level out the imbalance. Dehenna Davison, MP for Bishop Auckland, said that if businesses are to bounce back “we must look at the financial inequality presented by business rates”, while Mansfield MP Ben Bradley added: “A reduction in business rates could be a lifeline for our high streets. ”

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 ‘Unprecedented’ number of UK businesses seek rate cut

Property consultancy Colliers International says 170,000 businesses have started appeals against business rates since the coronavirus crisis started, more than the 159,000 queries recorded over the last three years combined.

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Nine in ten must learn new skills, says CBI

The Confederation of British Industry (CBI) says nine in ten workers will need to learn new skills or be retrained entirely over the next decade. In a report based on analysis by management consultancy McKinsey, the CBI says more than 30m people will need to reskill by 2030, with this costing an additional £13bn a year. The CBI is calling for the apprenticeship levy to be replaced with a “flexible skills and training levy” – and has also suggested the introduction of a training tax credit. Dame Carolyn Fairbairn, CBI director-general, said: “A failure to act will leave businesses facing skills shortages and workers facing long-term unemployment.”

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Furlough fears over tribunal increase

The number of employment tribunals involving individuals increased by almost 20% between April and June 2020, with employment experts suggesting the increase may be linked to confusion over the furlough scheme. Tim Hayes, a legal director in the employment law team at BDB Pitmans, comments: “The rise in tribunal claims is causing increasing concern among both employers and claimants.” He adds that it is “highly likely” numbers will continue to rise as the full impact of the COVID-19 pandemic “filters through to workplaces up and down the country”.

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Bailey warns of risk and uncertainty

Bank of England Governor Andrew Bailey has warned that there is a significant risk of economic growth being hit, noting the uncertainty that the increasing number of coronavirus cases brings. With the economy shrinking 20% in Q2, Mr Bailey has said he expects output to be down 10% in Q3 when compared to where it was at the end of 2019. Speaking during an online seminar for central bank governors yesterday, he said 10% is “still a huge gap”. He went on to say: “We’re operating at an unprecedented level of economic uncertainty. Of course, that is heightened now by the return of COVID…. The risks remain very heavily skewed towards the downside.” Mr Bailey also commented on below-zero interest rates, saying: “Our assessment of negative interest rates, from the experience elsewhere, is that they probably appear to work better in a more wholesale financial market context, and probably better in a nascent economic upturn”.



EY tax policy head: Bring on a budget

Chris Sanger, head of tax policy at EY, has urged Chancellor Rishi Sunak to deliver a budget, saying it will provide businesses and workers clarity and some certainty amid the uncertainties brought about by the coronavirus crisis and Brexit. Writing in the Times, Mr Sanger says: “The role of the budget is about more than announcing tax policy measures and reporting on the state of the economy”, saying there is a need to deliver “certainty and stability.” Mr Sanger says there has been “much discussion about the need, at some time in the future, to raise taxes”, adding that a budget gives the Chancellor the opportunity to “set out the long-term plan and a vision of the future shape of the country and its tax system.” Calling for a “road map for the economy”, he argues that there is a need for a “clear message” on issues such as the approach to be taken on corporation tax.

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Contact Paul Southward