Deferring fuel duty increase is good news for retailers, says advisor

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Knight: deferring fuel duty is good news for edge-of-town retailers

Barry Knight, head of retail at Grant Thornton UK LLP, claims the Chancellor’s Budget announcement to defer the duty increase on fuel is welcome news for the retail sector.

“The scrapping of the fuel duty increase will have been top of retailers’ wish list and is at last some good news for the retail community, which is still under tremendous pressure from low consumer confidence, cost inflation and rises in VAT and National Insurance,” said Knight.

“High fuel costs hit hauliers, individuals and shops as when people cut down on journeys they are also likely to cut down on household goods and other spending, which will have an impact on the whole economy. The deferring of a fuel duty rise will help online retailers in particular as it will keep delivery costs down and will particularly help edge-of-town’ (EOT) retailers.

According to Knight, EOT retailers suffer more from high fuel costs than out-of-town (OOT) retailers.

“Consumers tend to pick up only one or two items in smaller EOT retail parks but still have to go somewhere else to complete their shop,” he said.

“On the other hand, OOT areas tend to be big retail parks where the consumer can get everything. As a result, when fuel costs are high consumers are likely to restrict the number of trips they make and hence miss out on EOT. There are anecdotes of shoppers spending more on fuel going to EOT parks than on the goods they buy when they are there.”

Knight said a rise in fuel duty is often seen as a quick and good source of income for the Government and was pleased to see the Chancellor has not jumped on this bandwagon.

“Most retailers have experienced a dire first couple of months of the year so any measures taken to lure the consumer out will be welcome,” he said. “The lowering of the income threshold for tax, which will have an impact on close to 25m people’s purses, and putting a lid on further rises in fuel duty, could potentially help inject more spending on retail goods. This move is absolutely vital for the economy, if not to grow, at the very least to stabilise,” Knight said.