A leading retail body has urged the UK Government to freeze business rate rises at a “critical time” for the sector until the whole system can be replaced with a modern alternative fit for the 21st century.
As veteran retailer and former Wickes and Iceland CEO Bill Grimsey released a report warning that our town centres were on the brink of being consigned to “the dustbin of history” unless immediate action is taken, the British Retail Consortium (BRC) called for rates to be frozen until the 2021 revaluation.
“The current business rates system is not fit for purpose,” said BRC chief executive Helen Dickinson.
“It is a 20th century answer to a 21st century problem. Retail shoulders far more than its fair share, and the rates bill is leading to store closures and getting in the way of reinvention of our high streets,” she added.
According to the BRC, the retail industry, the UK’s largest private sector employer, makes up five per cent of the economy and pays nearly 25 per cent of the overall business rates bill – more than £7 billion per year.
“This is a disproportionate burden,” Ms Dickinson argued.
She said the BRC proposal would take some of the cost pressure off retailers from the apprenticeship levy, national living wage, and Brexit uncertainty and relieve balance sheets to focus on overhauling business models and training staff to accommodate tech-savvy shoppers.
Bill Grimsey, who published his first review of the UK retail landscape in 2013, was even more damning of the existing business rates system in the UK, which he called a “massive tax collection vehicle” that “strangled innovation at birth”.
According to the report, the retail sector pays a third of the £29 billion a year the Government earns through business taxation.
Mr Grimsey said: “It is a complex property and services tax that has spawned an entire industry of lawyers, advisers, appeal courts and other specialists. The Valuation Office Agency (VOA) has also grown accordingly, without the data structure or technology to service the increasing demands placed upon it.
“There is now a very strong case for replacing it with an alternative tax and this should be seriously considered.”
UK retailers have had a torrid year, with major chains, like Dixons Carphone, Marks and Spencer, Tesco and House of Fraser closing hundreds of shops and putting thousands of jobs at risk.
Some household names, like Maplin, which had around 200 stores and employed more than 2,000 staff in the UK, have closed for good.
There have been other dire warnings about the bleak future of the high street, with one report earlier this year predicting that a further 31,000 stores could close by 2022 – a third of that by the end of this year – as firms succumb to pressure from online competitors and a change in discretionary spending from retail purchases to entertainment.
Business rates were also cited by the Centre for Retail Research Retail at Bay 2018 report as a big challenge for bricks-and-mortar retailers.