UK consumer industries warn curbing energy support will hit demand

The mood among Britain's beleaguered retail and hospitality industries darkened on Monday on fears new finance minister Jeremy Hunt's move to rein in a vast energy subsidy plan and reverse planned tax cuts would further dent demand.

A two-year energy support scheme for households and businesses, expected to cost more than 100 billion pounds ($113 billion), will now end in April and be replaced by a more targeted scheme that will "cost the taxpayer significantly less than planned", Hunt said.

That move, a decision to reverse an income tax cut planned from April 2023 and an expectation that interest rates will rise further, exacerbated worries about consumer demand in Britain, where confidence levels are already at record lows.

Hunt was also criticised for reversing a decision by his predecessor Kwasi Kwarteng to bring back sales tax free shopping for overseas visitors.

Paul Barnes, CEO of the Association of International Retail, called it a "hammer blow" to UK tourism and the British high street.

"This short-sighted move is based on inaccurate and incomplete projections, and risks putting a brake on the return of international visitors who are vital drivers of economic growth throughout the UK," he said.

The British Retail Consortium also said it was disappointed by the move.

"This decision leaves the UK as one of the only European countries not to provide a tax-free shopping scheme to encourage tourism," Tom Ironside, the BRC's director of business & regulation said.

Britain's manufacturers association said business was still in shock at the past month's political and markets turmoil, with a long road to recovery ahead to restore the country's political and economic credibility.

"If government is really serious about boosting growth at national and regional level, given the scale of the economic challenges we face, it is more vital than ever it works with business on a long-term plan for the economy," Stephen Phipson, Chief Executive of Make UK, said.