If they are to be included in the new business rates surtax on premises with a rateable value over £500,000, some of Britain’s largest shops, such as supermarkets and department stores, face closures says the British Retail Consortium (BRC).
There are approximately 4,000 large-format retail stores with a rateable value of over £500,000. Like all of retail, these stores are already under pressure by soaring employment costs, high taxes, and rising rates bills. According to the BRC, some 1,000 have already closed over the last five years.
The retail industry accounts for 5% of the economy yet pays over 20% of all business rates bills. The financial strain is particularly 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 tight 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 BRC explain that large format retail stores play a vital role in the economy, employing approximately 30% of the industry’s 3 million workers. Moreover, they act as anchor tenants, attracting vital footfall to adjacent shopping and leisure areas, supporting cafés, pubs and smaller independents. Consequently, the closure of large stores, particularly in rural areas, will have a significant impact on the local economy and town centres.
The BRC anticipates that if all 400 at-risk stores were to close, up to 100,000 jobs could be lost and local councils’ business rates receipts from retail would fall by well over £100 million a year.
The Government is introducing a new permanent reduction in business rates for retail, hospitality and leisure (RHL) premises, replacing some of the previous reliefs available to RHL premises. The reduction will be funded by the new, higher business rates tax band on large properties. The BRC is therefore calling on the Chancellor to use the Autumn Budget to deliver this vital change without simply shifting the cost onto larger stores, which will be hugely damaging to our already suffering high streets.
According to the BRC, this can be achieved 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 reportedly lower.
Helen Dickinson, Chief Executive of the British Retail Consortium, said: “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. 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.”
