A new report published by the British Retail Consortium (BRC) calls on the Government to take “immediate action” to reduce the burden placed on retailers by business rates.
The study claims that this would help to “unlock the industry’s potential to support the economic recovery from the pandemic, ensuring that retail remains a provider of quality jobs and an important contributor to tax revenues for years to come.”
The report – Retail, Rates and Recovery: How business rates reform can maximise retail’s role in levelling up – is based on a survey of leading retailers carried out by the BRC. Retail accounts for over three million jobs spread across the UK and is responsible for over £400bn in consumer spending a year. The survey of retailers suggests that unless business rates barriers are addressed, the Government will miss a key opportunity in supporting their ambitious levelling agenda.
Key findings from the survey include 83% of retailers saying it is ‘likely’, ‘very likely’ or ‘certain’ that they will close shops if the business rates burden is not reduced as a result of the current Government review.
Meanwhile, 85% of retailers said that business rates is an ‘extremely’ or ‘very important’ issue for their businesses when opening or closing stores, whilst 67% of store closures in the past two years, business rates had a material impact in the decision-making process.
The report makes a number of recommendations aimed at encouraging investment and securing the viability of shops and high streets. These include cutting the multiplier to its original rate of 35pence in the pound (35%) and fixing the system of transitional relief, which cost retailers over £500m between 2017 and 2020.
The BRC also calls for the introduction of‘ Improvement Relief’ to ensure that rates bills do not rise immediately as a result of investment in a property.
The Government announced a Fundamental Review into business rates in 2020, which will report back this autumn. The stated aims of the review include “reduc[ing] the overall [rates] burden on businesses”.
Business rates were introduced in 1990, at a rate of 34.8 pence in the pound; this has since risen 47% to 51.2 pence in the pound in 2020. Retail, which accounts for 5% of the economy, pays 25% of business rates – an approximately £8bn bill for retailers across the UK. The huge cost of business rates has been a major factor in many store closures and business administrations in recent years.
Helen Dickinson, Chief Executive of the British Retail Consortium, said: “Given the retail industry contributes almost £100bn to the economy (Gross Value Added) and employs over three million people spread across the country, it has a vital role in both the UK’s economic recovery and the Government’s levelling up agenda. This report underscores the urgency of fixing the broken business rates system, which currently hold back new jobs and investment. With one in seven shops currently shuttered, it is essential that action is taken, or else it will be our local communities and high streets which suffer the consequences.
“The Government needs to bring the burden down and take action to ensure that the system reflects property market values more quickly. This should include a cut in the multiplier rate, returning it to its original rate of 35%. Furthermore, Government should introduce an improvement relief to prevent stores being immediately punished for investment into their property. At a time when the Green agenda is so important, it is madness that business rates should rise for a firm that adds solar panels to their property.”
NAM Implications:
- As retailers increasingly assess profitability by store…
- …the scale of business rates as a cost, is highlighted.
- Especially the fact that business rates are often greater than the cost of rents…
- …and less negotiable.
- Store closures are a foregone conclusion.
- Best work on some realistic what-ifs for your major customers…
