Supermarkets at risk of closing as a result of business rates rise

Approximately 50 of Sainsbury’s 600 supermarkets will become unprofitable in the event of a rates rise, the Financial Times reported, citing industry sources.

“Tens” of Tesco’s shops could also become unprofitable, a senior source at the retailer maintained, while almost all of Asda’s 600 shops would be impacted by business rate increases.

The government intends to increase business rates on properities with a rateable value above £500,000, which would equate to the top 1% of retail stores. The ambition is that the change would allow a rate reduction for smaller retailers and hospitality companies.

However there is anger among established grocers that fast-grown rivals Aldi and Lidl, which typically have smaller branches than traditional supermarkets may escape higher business rates. The FT reported that property experts at Colliers believe less than 10% of Lidl’s stores, for instance, will be hit by rates changes.

The additional rates cost is especially unwelcome at present, following punishing cost increases for retailers as a result of changes to national insurance in last autumn’s Budget, as well as a higher minimum wage. Retailers’ typically large workforces meant they were hit especially hard and there have been warnings about the effect on employment and investment.