Are business rates killing the high street?

Consortium of UK retail bosses calls on chancellor to fix ‘broken’ tax system

Consumers on Nottingham high street
(Image credit: Christopher Furlong/Getty Images)

The bosses of more than 50 British retailers including Asda, Harrods, Morrisons and Boots have urged the chancellor to fix the “broken business rates system” in order to help save the high street.

In a letter to Sajid Javid, the British Retail Consortium (BRC) notes that these rates have risen by 50% since the 1990s and calls for urgent cuts to the taxes - calculated according to the rental value of properties occupied by firms.

The bosses point out that the retail sector accounts for 5% of the economy but paid 25% of all business rates. This “disparity” has contributed to significant financial difficulties on the high street as well as “harming the communities [retailers] support”, they claim.

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A BRC survey published earlier this month showed that British retailers reported the weakest July sales growth since records began, says Reuters.

As part of the push to reverse this trend, the trade body has called for a freeze in the business rates multiplier, which is set by the Treasury and adjusted each year in line with inflation.

BRC boss Helen Dickinson argues that the new Boris Johnson government “has an opportunity to unlock the full potential of retail in the UK” by reforming the system.

“The fact that over 50 retail CEOs have come together on this issue should send a powerful message to government,” she said.

The publication of the letter to Javid comes a day after new figures showed the number of empty shops in town centres had risen to its highest level since January 2015, with the vacancy rate hitting 10.3% last month, City A.M reports.

In another sign of trouble, the Financial Times says that almost one in six English businesses has been “summoned to appear before magistrates for non-payment of business rates in the past year”.

Business rates increased across the UK in April 2018 for the second year in a row following a government review. Retail industry leaders have complained that the increases work in favour of online retailers such as Amazon, as their out-of-town warehouses are worth less than high-street property.

James Lowman, chief executive of the Association of Convenience Stores, told the BBC that the current property tax programme is “a really outdated system” designed for “a time when there only was physical retail, and people doing business from physical premises”.

Several major retailers have called for changes in the past in the face of growing online competition. Tesco has pushed for a “2% online sales tax that would help fund a cut in business rates for shops, while [Sports Direct owner] Mike Ashley has argued that retailers with more than 20% of their sales online should pay a 20% tax on digital sales”, says The Guardian.

Last month, the Treasury announced a £3.6bn fund that the department said would “support our high streets and town centres”, says the BBC.

Further details of the policy will be revealed “in the coming weeks and months”, the Treasury added.

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