The beleaguered consumer is facing pump price increases of 8ppl, which will take diesel up to 150ppl and petrol not far behind. Overall this double tax whammy could take as much as £3.5bn/year out of consumers’ pockets. The Chancellor has been advised that this would be a political and economical own goal because we need to be reigniting growth, not stifling it by hitting savings and retail sales yet again.
Already experts have suggested that fuel volumes are near to collapse in certain sectors of the UK which means that the tax-take by Whitehall is also reducing.
The government risks a downward spiral as higher taxes force fuel volume reductions and overall tax receipt reductions too.
We must hope that the Chancellor is listening as the independent forecourt sector is already suffering financial stress with lower volumes and margins because of extreme competition by the hypermarkets and certain oil companies. More tax will just inflate the closure rates, especially in fragile rural economies. The Autumn Statement is the Chancellor’s last chance saloon to drop these duty rises.
With average fuel prices now 16ppl for petrol and 21ppl for diesel higher than when the Coalition came to office in May 2010, the impact of increasing government taxation at just net 0.76ppl for duty and 2.5% for VAT may be less than some think. This reflects the Chancellor’s decision in his March Budget not only to defer the Labour duty escalator but to actually cut duty.
So we are all about 6ppl better off at the pumps than we might have been but it certainly does not feel like that to hard-pressed businesses and consumers!
Meanwhile, on a macro level, the Bank of England, Office for Budget Responsibility and a plethora of city analysts are steadily lowering their growth forecasts as the Eurozone crisis shows no signs of being effectively tackled.
While few have actually projected a double-dip leading to recession, it is clear that 2012 will be another annus horribilis for retailers across nearly all sectors.
The one area where analysts such as IGD and Verdict show optimism is the convenience sector both forecourt and standalone.