In the UK, a new Labour government is incoming: What this means for retail

In what has been a largely anticipated turnout, Labour has swung the election with a landslide majority, making Keir Starmer the UK’s next prime minister (made official once King Charles III formally requests him in during a ceremony later today). It marks the first change in government in 14 years, throughout which the Conservatives served at the helm.

In Labour’s manifesto, the party said it wanted to ring in “a decade of renewal” that would “turn the country around” for the “working people”. Starmer has also regularly been quoted as stating “Britain needs stability, not more chaos”, while highlighting five core missions as part of his incoming plan, including delivering economic stability and cracking down on antisocial behaviour.

As such, the UK is expecting some significant changes to come around over Starmer’s time in the hot seat, but what does this mean for the UK’s retail and business landscape? Here is what Labour have promised…

Labour takes the helm: From taxes to crime to employment

With Starmer’s heavy emphasis on reforming the economy, business taxation has been a core focus within his manifesto. If in power, he has promised to impose a cap of 25 percent on corporate tax for the whole parliament, with plans to later introduce a roadmap for business taxation before making further changes. The government further intends to create a National Wealth Fund that aims to support growth and clean energy through a capitalisation of 7.3 billion pounds.

In the way of business rates, Labour has promised to replace the system with a new set up that would “level the playing field between high street and online giants, better incentivise investment, tackle empty properties and support entrepreneurship”. The party has branded employment laws as “outdated” and plans to shift the National Minimum Wage age requirements that sets a lower threshold for hourly pay for people aged between 18 and 20. “Exploitative” zero-hour contracts and “fire and rehire” tactics will also be banned, while employees are to be given a wider span of rights from the moment they begin working.

For the Apprenticeships Levy, Labour wants to increase flexibility through an updated Growth and Kills Levy that would allow businesses to utilise up to half of their total levy contributions on non-apprenticeship positions, putting aside half of this for apprenticeships. Labour has further addressed the increasing retail crime, stating that it would create a standalone offence for assaults on shop workers.

How retail is reacting?

While it is all fine and well to make promises, whether these changes will actually influence positive change is still yet to be seen of course. However, the perspective of retail-related business organisations is largely optimistic, as many openly welcome Labour and Starmer into government.

RSM UK: ‘No mention of tax-free shopping’

Jacqui Baker, head of retail at RSM UK and chair of ICAEW’s Retail Group said all eyes would be on whether Labour was to stick to its “bold” promises. She added: “While Labour have vowed to scrap the current business rates system, retailers are nervously awaiting the details on how the system will work in practice. As the biggest burden for the sector, retailers are banking on an effective overhaul that makes it fit for purpose once and for all.

“Labour’s vow to clampdown on anti-social behaviour against shop workers will go some way in providing reassurance to staff that they can feel safe at work. Crime is a growing and devastating issue in the sector, so strong measures that deter criminals and make a real difference are urgently needed.

“However, with no mention of tax-free shopping by Labour, hopes for a U-turn are quickly fading. Recent ONS figures show net tourism spending has fallen 9 percent in Q1 2024, highlighting that the removal of the regime is having a substantial impact. In what seems like an easy win to boost the UK economy, it’s disappointing this isn’t top of the agenda for the new government.

“Looking ahead, with tax cuts feeding through to consumers’ pay packets, this should provide an uplift to spending as consumers start to feel better off. Plus, with interest rates expected to come down later this year, providing a boost to the property market, the retail sector should also benefit as consumers finally splash out on bigger ticket items for their new homes.”

BRC: ‘Crucial commitments for retail’

British Retail Consortium (BRC) CEO, Helen Dickinson, said: “The country has made its decision and we now look forward to getting down to business with the new government. Retail is an important source of employment and investment in every part of the country, and through its scale and reach can make a big contribution to Labour’s policy goals. Finding ways to unlock this contribution over the next five years should be a shared endeavour between the new government and the retail industry.

“Labour’s manifesto made some crucial commitments for retail, from reforming business rates, planning and the apprenticeship levy, to introducing a specific offence for assaulting a retail worker, and we now await the details of how these will be taken forward.

“Labour recognised that the business rates system is broken. With retail paying 22 percent of the total rates bill while accounting for 5 percent of the economy, it is the number one thing in the way of increased retail investment which could unlock growth across the economy. So we look forward to further engagement on the details as the work starts here in turning commitments into delivery.”

NWEC: ‘Much-needed certainty to businesses’

The CEO of New West End Company (NWEC), Dee Corsi, said: “Today’s result will bring much-needed certainty to businesses across the capital. Labour’s promise to deliver economic growth for Britain is reassuring for all who want to see our high streets thrive, and the new Government’s commitment to tackling a troubling rise in retail crime, reforming the outdated planning system holding back investment, and revising the burdensome business rates system is encouraging. Now, over the next 100 days, we must see swift action to turn these pledges into credible policies, constructed in close dialogue with the business community.

“If the new Government is truly committed to delivering growth for the UK, it is absolutely critical that businesses are invited to help shape the solutions to these thorny issues. As the voice of over 600 businesses with a presence in the West End and nationally, we are ready and waiting to partner with Labour to inform policies which will deliver on our shared vision for growth and restore the U.K’s competitive edge on a global stage.”