John Healey has been urged to tackle the “tsunami of costs” facing firms as consumer confidence tumbled ahead of the crucial Budget next week.
Brits’ confidence in the state of the economy worsened from -32 to -40 in October, according to the British Retail Consortium (BRC)’s index, marking the third consecutive month of deteriorating sentiment.
Growing fears of inflation and rising interest rates are combining to worsen consumer attitudes ahead of the Chancellor’s first budget, prompting businesses to warn that they cannot encourage spending any more without tax cuts.
Consumers’ net expectation of the state of their personal finances over the next three months worsened from -15 to -18 this month – the second-lowest level on record.
Brits’ spending expectations rose sharply in October, from a net reading of five to 15. Consumers would have already planned to spend more during the run-up to Christmas but rising inflation has worsened this outlook, the BRC said.
Consumer price inflation leapt from 3.1 to 3.5 per cent in the year to September, marking a worse rise than economists had predicted, it was revealed on Wednesday.
More than a third (36 per cent) of shoppers expect to spend more on groceries in the next three months, compared to 28 per cent in September, indicating that Brits are bracing for the price of food to rise sharply.
Supermarket bosses say they are doing everything they can to keep a lid on rising energy and supply costs, but industry figures have tipped food inflation to surge to 6.4 per cent by July next year.
Healey urged to boost consumer confidence
Helen Dickinson, the BRC’s chief executive, said: “Households everywhere will be looking to the Chancellor to tackle the cost of living challenge at next week’s Budget.
“[The] government must act on the tsunami of costs that have hit the industry, from employer National Insurance Contributions to business rates. A little breathing room for retailers at the Budget can mean a lot of breathing room for households.”
Retailers are “doing everything they can” to keep prices down, Dickinson added, but a 20 per cent jump in tax on the industry across two years has left businesses with “no more room for manoeuvre”.
In recent weeks, retail bosses have urged the government to exclude high street shops from the highest business rates multiplier and roll back recent hikes to employer national insurance contributions (NICs).
Retailers say the NICs increases, along with above-inflation hikes to minimum wage, are preventing them from investing in employment to stem the rising number of young people who are not in education, employment, or training (Neet).
Thierry Garnier, chief executive of B&Q owner Kingfisher, wrote in City AM last week that the company’s provision of work experience placements for young people “depends on what the Chancellor decides in this Budget”.