Naturally, the business and financial news in most of the media has continued to be dominated by Covid.
(And honestly, who would have believed in March 2020 that we’d still be struggling through that mess into a second year?) with just the occasional distraction relating to Brexit – and even that has mostly focused on the rather specific situation in Northern Ireland, rather than the general problems already being experienced by businesses in the rest of the UK trying to trade with Europe. In that respect at least, perhaps the government is quite fortunate – for the time being they can blame everything on ’Covid’.
What other news there has been, particularly from the ‘retail’ sector, has been consistently grim: hardly a week going by without yet another well-known High Street retailer falling into administration, followed a while later by the news that the ‘brand’ has been bought-out of administration by an online operator – and inevitably that news includes reference to the permanent closure of most /all of their physical shops with the associated loss of thousands of retail jobs.
At the time of writing, it appears that the Chancellor is set to extend the existing Business Rates Relief scheme in the forthcoming budget, possibly for another 12 months. Likewise, there is much speculation that current furlough schemes will also be extended, at least to the end of June. However, the conclusions of a more in-depth study of the whole system of business rates, which had been expected around now, have apparently been delayed until the autumn. Given the prevailing circumstances that may not be unreasonable.
However, for the retail sector as a whole the delay is quite nerve-wracking. The reason: it has been strongly rumoured that one of the options being considered in that study is an online-sales tax, intended to ‘level the playing field’ between physical shops and online operators.
Now apart from the natural curiosity of seeing whether a Tory Chancellor has the nerve to (eventually…) introduce a new tax that would hit the big boys in the retail playground – and Amazon is only the biggest of all – many analysts are also curious as to the mechanics of how an internet-sales tax might work in practice.
For example, one obvious route would be to introduce another, higher, rate of VAT for online sales – say 22.5% instead of 20%. Older readers will recall that over the years there have been quite a range of ‘special’ VAT rates at different times, and in theory now that we have ‘Brexit’ there’s nothing to stop the UK from introducing any new VAT categories and rates that HM Government might like.
If they do eventually use that method, of course all finance and accounting staff would like as much notice in advance as possible– no more ‘overnight’ VAT changes, please! But whichever method is used, there’s another issue that would need to be resolved: just what counts as an ‘internet sale’? Most people will automatically think of Amazon and eBay of course; but what about retailers who have actual shops and operate ‘click & collect’ services: remember that’s not only the likes of Argos or B&Q. As we’ve noted over the last year or so, even some of the more enterprising petrol retailers now offer that service for their own goods, not just as collection points for the online-only retailers.
And while we’re still on the subject of the ‘big boys’ - they don’t come a whole lot bigger in the petrol-retailing playground than Euro Garages (EG) and Asda. As we reported back in November, the deal whereby EG Group acquire Asda seems to be concluding without much interference from the Competition & Markets Authority.
Given the experience of previous big-name mergers in petrol retailing, some of us still find that a little ‘odd’. Recent news articles suggest that ownership of Asda’s existing forecourts will be separated from the supermarket entity and integrated into the EG network, which will end-up being around 715-strong (ie around 5% of the UK’s total site number). Assuming that goes ahead, it’ll be interesting to see just how that works out.
It’s probable that many readers of this magazine will be very familiar with Euro Garage’s existing sites: most are modern, full-facility, premium-branded forecourts. It’s also quite possible that many of the same readers won’t have spent much time at a typical Asda forecourt recently. If you haven’t, let’s just describe them as a bit ‘basic’ in terms of retail facilities – often nothing more than a payment kiosk. Now it seems that the intention is retain the ’ASDA’ branding on these sites, and apparently to keep them as ’price leaders in the fuel market’.
On that basis there’ll be a very large operator in the market running two parallel networks: one offering all the mod-cons with premium-branded fuels and premium pricing, and the other a basic offering with supermarket-branded fuel at appropriate pricing.
Believe it or not, the idea isn’t completely new, although to see the closest to running ‘parallel retail networks’ owned by the same company but providing different fuel brands and customer offers, you’d have to go back a very long time indeed. Back to the days when BP had their legacy ’National’ brand (anyone still remember the Smurffs?) and Esso had ’Cleveland’. In both cases it’s fair to summarise that in the long term, the cost of maintaining such parallel marketing operations proved to be greater than the benefit; the very best (few) of the National and Cleveland sites were absorbed into the BP and Esso networks respectively, the remainder sold off, mostly for non-fuel use.
Of course, history doesn’t repeat itself exactly, and it’s unlikely that EG will run these two networks quite as the oil companies did back then – from memory they maintained two completely separate teams of ‘area managers’, ‘dealer managers’, marketing and advertising teams, etc - but it remains a fact that the two networks at present are radically different.
One to keep an eye on for the future.
EKW Group provides accounting and payroll solutions for independent petroleum and convenience dealers, including fully outsourced accounting options: