As many as 400 of the UK’s largest retail sites, including supermarkets and department stores, are at risk of closure if the government goes ahead with plans to hit some operators with higher business rates.
The new rules are set to target all business premises with a rateable value of more than £500,000. Analysis by the British Retail Consortium (BRC) found the surcharge could apply to 4,000 large retail outlets, with around 10% likely to close due to the extra cost pressure. The trade body noted the potential move comes at a time when retailers are already being squeezed by higher employment costs and taxes.
The BRC highlighted that the retail industry accounts for 5% of the economy, yet pays over 20% of all business rates bills. This load is already felt by large stores (those with a rateable value of over £500,000), which pay around a third of retail’s total business rates bill.
“Given the small profit margins that exist across retail (around 2-4% for food), a significant rise in rates for large stores would force these shops to raise their prices, employ fewer people, or even close their doors entirely,” the trade body said.
The 4,000 large stores employ approximately one in three of the industry’s three million workers. They also play a key role in attracting footfall to shopping and leisure areas.
The government is introducing a new permanent reduction in business rates for smaller retail, hospitality and leisure (RHL) premises. This will replace some of the previous reliefs available to RHL premises, and will be funded by the new, higher business rates tax band on large properties. This follows a pledge by the Labour government to make the business rates system fairer.
The BRC is calling on the Chancellor Rachel Reeves to use the Autumn Budget to deliver this change without simply shifting the cost onto larger stores, which it believes would be “massively damaging to our high streets”.
The trade body suggests this can be done without cost to the public purse, by removing those stores from the new higher business rates tax band and slightly increasing the rates to be paid by the remaining large properties like office blocks and other big commercial buildings, where business rates are a much smaller share of costs and the knock-on impact on jobs and prices is far lower.
“Britain’s largest shops are magnets, pulling people into high streets, shopping centres and retail parks, supporting thousands of surrounding cafes, restaurants and smaller and independent shops,” said Helen Dickinson, Chief Executive of the BRC.
“After years of rising costs, far too many stores have disappeared – leaving behind empty shells that once thrived at the heart of our communities. Four hundred more large stores could disappear if the government forces them into its new higher tax band. This would mean up to 100,000 jobs lost, emptier high streets, and less revenue for the Exchequer.
“The Chancellor can back families, jobs and high streets this Autumn, by excluding large shops from the new higher business rates tax band. This would not cost the Exchequer a penny, yet would help secure the future of 400 retail stores, and the communities they support, right across the country. But failure to act risks shuttering hundreds more stores, costing jobs, communities and the economy far more in the long run.”
NAM Implications:
- The impact of the Business Rates rise is obvious to all…
- …with the possible exception of the government.
- Unwise to hold a breath in anticipation of a reversal of intent re the Autumn budget.
- (Or strict compliance with election pledges?)
- Accept this is a done deal, and focus on optimising the performance of the remaining shops…
