Spring Budget 2022: what’s in store for the food sector?

Now that all Covid restrictions have been lifted across most of the UK, the annual Spring Budget released on Wednesday 23rd March is the next event that the food and drink sector will be paying close attention to.

Prior to the budget announcement, the Office for National Statistics’ (ONS) latest Business Insights study found that 5% of business owners “have low or no confidence of surviving the next three months” which indicates 280,000 businesses are at imminent risk of collapse.

Moreover, a quarter of enterprises in the hard-hit food services sector are still not fully trading. 

How businesses are feeling
Alan Thomas, UK CEO at Simply Business, one of the UK’s largest providers of small business insurance, explained the situation: “Ahead of the Spring Budget, small business owners are at breaking point – feeling the crippling pressure of rising costs as energy and fuel prices reach record levels.

“For SMEs across the UK, these challenges are acute with their impact coming at a time when they’re still recovering from the effects of Covid-19. Coupled with widespread staff shortages, cost of materials and ongoing supply chain issues, it’s an increasingly difficult landscape for SMEs. So, it’s vital the Chancellor is bold and decisive in his Spring Budget to brighten the outlook for millions of British small businesses.”

“Losing an eye-watering £127bn in total so far – equating to over £22,500 each – it should not be forgotten that small business owners have been disproportionately impacted by the pandemic. Yet their importance to our economy is undeniable, accounting for 99% of all British businesses and contributing trillions of pounds a year in turnover.”

Martin McTague, national chair of the Federation of Small Businesses (FSB) agreed, adding: “Consumer confidence has plunged and the cost-of-living squeeze has intensified, with record fuel prices and sky-high utility bills meaning loss of disposable income.

“Small businesses increasingly feel that the Government is indifferent to the cost pressures they face. The planned hikes to national insurance and dividend taxation taking effect in a matter of days, alongside an income tax threshold freeze, will, for many, be the final straw.”

What is the food and drink industry hoping for?
ONS found that the top two concerns were inflation of goods and services prices (21%) and energy prices (15%). However, another main issue that independent fine food retailers with restaurants or cafés are worried about is a rise in VAT. After reduced rates during the pandemic provided a short but necessary period of relief, food businesses are still struggling to reach pre-Covid profits, and a rise in VAT could push them into the danger zone.

Alan Thomas explained: “We’re calling on Chancellor Rishi Sunak to place small businesses at the heart of his Spring Budget. Reassessing business rates and reviewing tax hikes would be a welcome start. Retailers that had seen a reduction in business rates are expecting it to rise again from 31 March. What’s more, hospitality businesses that had seen the VAT reduce are expecting it to rise again. These tax changes will directly hit the pockets of small business owners and it’s, therefore, no surprise that a recent YouGov study showed 79% are against this move.

“The Chancellor can demonstrate his support and act for the sake of nearly six million UK small businesses. Put simply, the government must ease the pressure on struggling self-employed people so they can help our communities - and economy at large - bounce back.”

According to FSB’s Martin McTague, fine food businesses are also looking for the government to “Increase the Employment Allowance to £5,000, up the small business rates relief threshold on rates to £25,000, and take action on surging fuel and utility bills.” Additionally, the FSB is calling for “‘Pay as you grow’ options to spread the pressure of debt repayments to be opened up to users of other state-backed loan schemes beyond just bounce-backs.

“We urgently need to see the Chancellor ease the pressure on the five and a half million small firms and sole traders on which our recovery will depend.” 

The Spring Budget on the 23rd of March could provide food and drink businesses with the necessary tools to overcome damage caused by Covid if the industry is listened to, but we will find out on Wednesday whether the chancellor’s announcement will favour the sector.