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Wednesday 16 April 2014

Autumn Statement offers ‘crumbs of comfort’

5th December, 2013 by Ron Emler

For once a Christmas present – of sorts – from the Chancellor of the Exchequer. No fresh impositions on the drinks sector in the Autumn Statement.

True he did not abolish the excise duty escalator, so duties will increase yet again in April, but at least he did not produce an unwelcome rabbit out of the hat.

In fact, his proposals and the economic background against which they were announced, offered some crumbs of comfort. On the basis that the economy will pick up pace in 2014, it is reasonable to assume that people will have a little more to spend and that some of it will go on leisure activities such as visits to the restaurant or pub.

Capital Economics, the respected independent forecasting house, suggested even before the Chancellor unveiled his plans that real (after inflation) household spending would rise by about 2% in 2014. In particular it suggested that in the second and third quarters of this year “there were signs that the pubs and restaurants sector has begun to turn a corner” and went on to predict that spending in pubs and restaurants could rise by 5% next year (2% in real terms) as the benefits of an improving economic performance begin to filter through to disposable incomes.

That will be welcome in a sector that has suffered more than most since the financial crisis struck in 2007/8.

And among myriad changes that will help small businesses such as cancelling planned petrol price rises, Osborne also announced two measures that will help alcohol retailers in particular. Their effects may be modest, but at least they are steps in the right direction.

First, he has heeded warnings from HM Revenue and Customs (HMRC) about the loss to the Treasury from the illicit trade in wines and spirits, which could be costing him more than £1bn a year. So early in the New Year a registration scheme for alcohol wholesalers is being introduced.

It will require “that alcohol wholesalers must meet certain standards and be approved by HMRC prior to trading. A wholesaler would be required to demonstrate they are ‘fit and proper’ to trade and, where standards fall short, their permission to trade in alcohol products may be refused or revoked.” And in 2016 HMRC approval will be required before anyone can become an alcohol wholesaler.

That may help to curb the illegal trade in alcohol, but the Wine and Spirit Trade Association said: “We have concerns about the scope and extent of the scheme and have fed these concerns back to HMRC. We are waiting for them to respond to the consultation and we will be looking to ensure that the scheme does not place unnecessary burdens on business.”

The more cynical say that if alcohol taxes were reduced, the temptation to trade in illicit products would follow suit.

The second measure introduced by Osborne was as part of an effort to revive Britain’s ailing high streets where about one in five of all retail premises is empty. He plans to halve the business rates for new occupants of previously closed shops (including restaurants) and pubs for the next two years. This, the Chancellor calculates, will mean that they pay £1,000 less than they would have done.

It may not prompt a flood of reopenings, especially as the venues that have closed were the least viable in the first place, but again it could make a difference at the margin. Anything that boosts business should be welcomed.

Further reaction to the chancellor’s Autumn Statement will follow on the drinks business tomorrow.

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