Momentum behind the post-Brexit consumer-spending boom appears to be slowing. As City A.M. reports today, a GfK poll found that UK consumers’ confidence took a turn for the worse this month, with the index slipping a point to a score of minus six.
It would be easy to dismiss the dip as mere jitters but a rumbling storm could be brewing in the economy, stoked by inflation.
The devaluation of sterling since the pre-referendum peak has led to price increases for imports, including fuel and food. The Bank of England said it expects inflation to break its two per cent target when February figures are reported in late March. By the end of the year, inflation may have climbed by nearly three per cent.
As consumer price inflation picks up pace, forecasters are almost unanimous in their belief spending will come under increased pressure, hitting demand. That means businesses will need all the help they can get as they face rising operating costs whilst navigating Brexit.
With just over a week to go until the Budget, ministers would be wise to see which way the wind is blowing and clamp down on spiralling business costs of their own making.
Business rates, due to rise in April for many London businesses, are ripe for reform. As a first step, meaningful transitional relief must be provided in the Budget. Longer-term, more frequent rates revaluations would avoid the nightmarish, cliff-edge scenario that is playing out this year.
The apprenticeship levy, a one size fits all stealth tax slated for launch in April, should be scrapped. Then more money can actually go into apprenticeships and training.
The national living wage, a baby of former chancellor George Osborne, is probably a juggernaut that is too late to stop. But it should not be decided politically, rather set by the Low Pay Commission. Current chancellor Philip Hammond should give this independent body back the power to set the level of minimum wages.
This Budget, the first for Hammond and in the same month as Prime Minister Theresa May triggers Article 50, will be closely watched. It's time for the government to show it is serious abut helping Britain's job creators by being unashamedly pro-business. This must start with tackling costs.