Government under fire over plan for businesses to cut prices
Plans by the government to introduce a campaign asking businesses to cut prices for consumers to ease the cost of living crisis have come under fire from business leaders in Greater Birmingham.
Number 10's new cost of living tsar David Buttress, the former chief executive of Just Eat, has asked business leaders for their ideas on “how to help ” the cost-of-living crisis
But a taxpayer-funded ad campaign to promote the initiative will run next month.
The campaign would be about recognising the efforts of businesses who are trying to help consumers with the rising cost of living, and "amplifying and channelling them" as well as encouraging other businesses to do the same.
Businesses will be encouraged to join the campaign by introducing price-cutting measures, and in exchange will add the campaign name and logo to their branding with the campaign due to go live in early July.
Previous Government initiatives such as the Eat Out to Help Out Scheme offered support to those businesses operating in the hospitality industry to help with the introduction of the Scheme, however Government sources have said they will not provide any funding for businesses to cut prices for this latest proposal.
Henrietta Brealey (pictured), chief executive of Greater Birmingham Chambers of Commerce (GBCC), said: “Businesses and individuals need the Government to urgently bring forward a comprehensive plan to tackle inflationary pressures.
“Serious issues require serious solutions. Our latest Quarterly Business Report survey shows that 56 per cent of businesses are expecting to raise their prices over the next three months - the highest figure in the 33-year history of the report; much of this was attributed to labour shortages, soaring utility bills and the spiralling costs of importing raw materials.
“On the cost of doing business crisis, we are calling on the Government to reverse the recent increases in National Insurance, cut VAT on firms ' energy bills for at least 12 months and urgently reviewing the Shortage Occupation List.
“Time and again I am struck by just how passionate many of our members are about working with community and charitable organisations to make a difference to local people and the collective impact these meaningful partnerships are making in these challenging times. ”
Ann Tonks, managing director of the Edgbaston restaurant Chapter, described the request for business to cut prices to help with the rise in the cost of living as “frankly absurd ”.
She added: “I 'm afraid it shows the government has no grasp on reality. The cash position for those of us operating in hospitality has been squeezed for four months through a combination of huge increases in the cost of produce and utilities costs.
“Our profit margin on food has declined considerably since the first of March meaning it costs several thousand pounds more to buy the same produce.
“These are unprecedented times and this cost of living crisis has followed immediately on the heels of Covid which devastated our industry for two years.
“I would suggest to the government and Mr Buttress, the so called 'cost of living tsar ', to instead support the SMEs who account for such an important part of this nation 's economy and way of life; we desperately need essential cuts in VAT on utilities, a reduction on VAT on our industry 's food sales to 5 per cent and the introduction of another loan scheme to help the essential issues of cash flow. That would be the kind of buttress this nation is looking for. ”
Andrew Goodacre, chief executive of Bira, expressed concern about the campaign which he said would harm independent retailers further.
He added: "Asking retailers to reduce prices is a flawed idea from an independent retailer perspective. The business tsar David Buttress believes that retailers can cut prices by reducing spend on marketing spend - a policy clearly aimed at the large retail chains because small indie retailers do not have large marketing spends to start with.
"Such a policy is likely therefore to disadvantage the thousands of smaller retailers who struggle to compete on price in normal times.
"This policy also assumes that retailers are adding on all the increases they are experiencing, which is simply not true. Supply chain inflation has been ahead of consumer inflation for some time, and as a result independent retailers have been operating on reduced margins by suppressing the retail prices.
"Add in the huge increases on energy, wages and business rates, and it becomes clear that the idea of further reducing the profit margin is unrealistic.
"We believe that government intervention is needed to reduce prices and stimulate demand, and the best way is to reduce Vat (as they did for hospitality during Covid). With inflation at 10 per cent, VAT income has been increasing or the government, giving them the opportunity to support businesses and stimulate consumer expenditure."
Anne-Marie Simpson, owner, Simpsons Gin Bar in Sutton Coldfield, said: “The impact of the cost-of-living crisis is really affecting business, with footfall down at least 40 per cent for us compared to immediately post-pandemic.
“The current 20 per cent VAT level, together with wage and cost inflation, is putting a real squeeze on hospitality businesses. It is a challenge choosing between increasing prices to cover high overheads and lowering them to encourage increased footfall, with many hospitality firms like us already offering discounts and reduction offers. ”
The Q2 Quarterly Business Report briefing event is taking place on 19 July at Birmingham City University - following a run through of the latest results, the audience will hear from representatives from the likes of Openreach and Air IT discussing trends such as digital transformation and technological resilience in Greater Birmingham - click here to book your free place.