22nd October 2018
Leading voices in the retail sector, including Tesco CEO Dave Lewis and 'Queen of Shops' Mary Portas, have been heavily critical of the current business rates system, viewing it as a root cause of many high street departures and redundancies. It is accepted in the industry that business rates continue to play a role in hindering bricks-and-mortar retailers from competing successfully with online businesses.
The Centre for Retail Research (CRR) reported that in 2018-19, a bricks-and-mortar retailer will pay more than £7billion in business rates to HMRC – equating to 2.3 per cent of their total sales. By comparison, the online sector will pay £457million – just 0.6 per cent of their total sales.
Business rates are calculated every April based on the Consumer Price Index (CPI) of the previous September.
News that the CPI measure of inflation dropped to 2.4 per cent will cause further frustration among retailers. Real estate advisor, Altus Group, says it is likely to result in a hike in business rates for retailers to the tune of more than £180million, with those in London, the south-east and the south west among the hardest hit.
Last week the Shadow Business Secretary, Rebecca Long-Bailey, called on the Chancellor to reform business rates in his upcoming Autumn Budget, adding that business rates were a “root cause” for 100,000 retail redundancies over the past three years.
UK retail store closures are currently at their highest levels for more than a decade, particularly among so-called traditional retailers. The retail sector is already facing challenges to keep up with an ever-changing landscape. Technology, consumer demands, AI and new marketing strategies are all adding pressure to the industry and a further hike in business rates could well tip some retailers over the edge.
In a month where Coast, WH Smith and French Connection have revealed difficulties, let’s hope the Government listens to those in the industry and takes action before it is too late for many of our best-known retail brands.