What’s in store for retailers in 2024?

The announcement made by Chancellor Jeremy Hunt in the Autumn Budget has unveiled a series of measures aimed at bolstering the UK economy, with the aim to particularly benefit retail. Hunt believes that the reduction in National Insurance, the freezing of business rates, and increments in the National Living Wage present a significant financial relief scheme – but is it really that simple?

Hunt supposed that by slashing 2% off National Insurance from January, retailers could stand to benefit from substantial savings for both employees and employers, which could potentially have positive effects on consumer spending also.     

He also announced an increase in the National Living Wage, extending to 21 and 22-year-olds, indicating a potential rise in disposable income among younger workers.

Hunt’s freeze on the small business multiplier and the extension of the 75% discount on business rates for retail aims to alleviate financial pressures. He hopes this temporary discount could save the average independent shop a considerable sum, fostering a more sustainable operating environment.

However, amidst these favourable measures, challenges will still persist. The uncertainty surrounding energy bill support for businesses and the impending end of the Energy Bills Discount Scheme by 31 March 2024, might pose hurdles for cost management and will potentially impact profit margins.

The retail landscape has shown mixed signals in recent months. While total retail sales in November 2023 exhibited a growth of 2.7%, this figure falls short compared with the growth witnessed in November 2022 (4.2%). Food sales remain a stronghold, although showing a slight decline in growth compared with previous months, while non-food sales witnessed a decline, particularly in the in-store and online sectors.

Insights from industry figures like Helen Dickinson OBE of the British Retail Consortium and Paul Martin of KPMG suggest a cautious outlook. Dickinson emphasises that the upcoming cost pressures – including the rise in business rates and increased regulations – might limit retailers’ ability to invest in price reductions for customers. 

Meanwhile, Martin highlights the weaker sales growth, attributing it to the cost-of-living crisis impacting consumer spending patterns.

Sarah Bradbury, CEO of IGD, underscores the challenging retail environment, with consecutive months of decline in food and drink sales. Despite a marginal increase in sales compared to November 2022, the sector faces challenges, including reduced footfall influenced by adverse weather conditions and lingering uncertainties among consumers, despite a slight rise in shopper confidence.

The road ahead for the retail landscape in 2024 appears nuanced. While government measures aim to bolster businesses, challenges such as rising costs, shifting consumer behaviours, and economic uncertainties could temper the sector’s growth. The sector’s ability to navigate these challenges and adapt to evolving market dynamics will determine its resilience and success in the coming year.