The Government should be listening to the concerns of businesses - Andrew Vine
A veteran businessman who built several notably successful firms once told me that what made his heart sink more than anything were politicians who thought they knew more than he did.
He’d met plenty and with characteristic Yorkshire bluntness derided them as know-it-alls who in reality knew far less than they imagined. Nevertheless, they would spout with absolute certainty about what was best for businesses without ever having run one, or even worked in the private sector where companies either make a profit or go under.
He didn’t single out either Labour or the Conservatives for particular criticism, saying they were equally guilty of excessive confidence in their own expertise. Above all, he wished they would spend more time listening to those at the sharp end of business than lecturing them.
I can easily imagine the bosses of Britain’s leading high street retailers heartily agreeing with that shrewd man who spoke from half a century of experience in business, because a warning from them to the government amounts to a plea for it to listen.
It came in the form of a letter to the Chancellor, Rachel Reeves, telling her that rising costs imposed in the last budget will result in prices going up, sending inflation spiralling this autumn.
Signatories include Tesco, M&S, Sainsbury’s, Morrisons, John Lewis, Aldi, Lidl, Ikea and Boots.
When you have companies of that calibre warning of trouble ahead, any sensible government should sit up very straight and take notice. But there isn’t much sign of that happening.
The response to the letter – and to the British Retail Consortium, which echoed the companies’ concerns – was the blandest of statements about the government being supportive of business before veering off into some guff about striking trade deals with the US and India.
From the perspective of any high street in our county, such trade deals seem either irrelevant, or even harmful, given that the US treaty has put Hull’s Vivergo bioethanol plant out of business with the loss of 160 jobs and potentially thousands more in its supply chain.
Boasting about a deal that has produced such a terrible consequence in response to concerns raised by leading companies doesn’t inspire confidence in the government’s ability to boost business.
The letter to the Chancellor spells out how the government has done precisely the opposite.
The companies say the increase in employers’ national insurance and the rise in the minimum wage has landed them with £7bn in extra costs. Added to that, a planned increase in business rates for large shops will place a further burden on retailers.
Firms cannot afford to absorb these costs and will have to pass them on to customers, which could result in inflation rising to six per cent this autumn – just at the point when consumers will also be hit by increasing gas and electricity bills.
Inflation is already running at 3.8 per cent – almost double the Bank of England’s target of two per cent – and if it leaps up even further that is going to be very bad news for countless households in our region.
And equally bad news for our high streets if companies that are at their heart face relentlessly rising bills because of government policies.
We know from bitter experience that retailers looking to drive costs down eventually resort to shutting shops and cutting jobs.
Only weeks ago, a study of Yorkshire town and city centres found that in some places more than one in seven shops stands empty, with Bradford, Doncaster, Wakefield and Huddersfield among the worst affected.
The knock-on effects are seen all over the county – once thriving shopping streets becoming dilapidated and less attractive to customers, who either go elsewhere or buy what they need online, accelerating the spiral of decline as footfall drops and yet more shops shut.
One of the most worrying aspects of the warning from the big retail players is that the difficulties they face are only now becoming apparent, getting on for a year from Ms Reeves’ first budget.
She will deliver her second in a couple of months’ time against an uncertain economic outlook, and if businesses are expected to stump up even more in taxes as part of an effort to plug the hole in the public finances, the result could be yet more closures and job losses.
The retailers are not alone in warning that businesses are suffering as a result of the last budget. Their concerns come soon after the hospitality industry raised alarm at the numbers of hotels, restaurants and pubs shutting, with thousands of jobs going as a result.