A striking dichotomy facing the UK currently is a government looking to roll out devolution and ‘good growth’ across the country, whilst significant parts of the retail and leisure sector are suffering from a heavy tax burden, consumer hesitancy and a sense of uncertainty about the future. What legislative levers can be pulled to remedy current ills during the forthcoming budget, and what can the Chancellor realistically do amid so many competing demands?
September’s CBI survey was not happy reading for the UK’s retailers, with weighted sales volumes falling to -55%, and orders falling at the fastest rate since the monthly study began in 1983. According to research from Insolvency Practitioners, amid high and rising labour costs and other adverse factors, the number of leisure and cultural firms facing significant or critical distress was up 27% in Q2 2026, with hotels threatened with insolvency up 26% and 18% more food outlets at risk of closure than the previous quarter.
Furthermore, there are more pipeline measures which have proved to be controversial for the sector, such as discretionary powers for regional mayors to impose visitor levies, and Business Rate changes which arguably seem to redistribute a lack of fairness rather than provide a solution. The news across the board, however, is not all bad. According to the ONS, Q2 sales volume was up 0.9%, with online sales particularly buoyant.
Possible measures?
Given this seemingly contradictory picture, what could the Chancellor do (given modest and shrinking fiscal headroom) to improve the lot of Britain’s retailers?
Reverse the £500,000 Business Rate multiplier – thousands of sector properties have been subject to a standard multiplier of 50.8p, rather than the lower rate set as low as 38.2p from April 2026. While the higher tariff was aimed at large distribution and fulfilment centres, the legislation has had rather more of a buckshot effect and affected exactly the high street ‘anchor tenants’ the mechanism was intended to help. A review of pub and hotel valuations with launched in August 2026. Projected cost: £1 billion, political feasibility: medium.
Introduction of local income tax precept – the government’s devolution agenda includes giving regional authorities a proportion of income tax (replacing current settlement formulas), providing an increased incentive to create pro-growth conditions for businesses. Other measures from regional leaders such as more integrated public transport plans explicitly linked to footfall could also contribute to maximising retail revenue. Projected cost: minimal, political feasibility: high.
Selective VAT relief – targeted or seasonal reductions in VAT would alleviate pressure on the sector. However, the Treasury would be incredibly reluctant to relinquish any of the £57 billion raised. Projected cost: A 10% cut = between £4-£8 billion, political feasibility: low.
Measure | Annual Treasury cost |
Christmas VAT cut | £0.5bn to £1bn |
Hospitality only | £4bn to £6bn |
Full tourism package | £5bn to £8bn |
Reduce employment taxes for entry-level and part-time jobs – National Insurance threshold changes have increased sector burdens by £1.5 billion over the last two years, increasing entry levels costs by 10% and part-time by 13%. With youth unemployment currently running at 16.4%, this could be a particularly attractive option. Projected cost: £1-£2 billion annually, political feasibility: medium/high.
Guard rail the Visitor Levy – warnings about the possible knock-on effects of the ‘tourist tax’ seemed to be heeded, when regional mayors vowed to cap the levy at 5%, compared to Amsterdam for example which is 12.5%. Projected cost: negligible, political feasibility: very high.
Summary
Given the limited headroom the Chancellor currently has at his disposal, a couple of the suggested measures above could make a material difference to the sector and only cost a couple of billion pounds - which is obviously a significant sum - but in relative terms given annual government spending is £1.37 trillion is not an outlandish sum.
