Retailers have called on the government to tackle the “madness” of the business rates system to stop it from “strangling our high streets”.
Bricks-and-mortar operators face an additional £200m in annual property bills from today, after the business rates multiplier jumped to 50.4p in the pound.
Rates have surged 45% since their introduction in 1990, when they were set at just over 38p in the pound.
It means high street retailers will now pay more than half of the rentable value of their stores in business rates before they have made a single penny in sales.
The tax has been blamed for the demise of a number of bricks-and-mortar businesses. The likes of Maplin, Toys R Us and Poundworld have all gone to the wall since the start of 2018, while others including New Look, Carpetright and Mothercare have launched CVAs to shutter dozens of stores and slash rents.
Arcadia is the latest major high street name to be considering a CVA, while last week Retail Week revealed that Select was on the brink of administration, putting the future of another 180 stores and 2,000 jobs at risk.
The British Retail Consortium has today urged the Treasury Select Committee to fix a “broken business tax system” that it claims is “strangling our high streets”.
Store closures between 2017 and 2018 sparked 48,000 job losses, the BRC said, as retailers struggled to keep up with rising property costs. The wider British economy added 415,000 new jobs during the same period.
The BRC has called on the Treasury Select Committee, which is conducting a review of the business rates system, to “ensure that the tax framework is fit for the 21st century”.
BRC chief executive Helen Dickinson said: “Retail is in the midst of a transformation as new technologies and changing consumer behaviour impact the way we shop. The investment needed for this reinvention is being held back by a rising tide of public policy costs, with business rates the biggest among these.
“Retail accounts for 5% of the economy, yet pays 10% of all business taxes and a staggering 25% of business rates. This is simply not sustainable; the raft of shop closures and job losses are testament to that.
“While Government fiddles at the edges, retail suffers and consumers pay the price. The Treasury Select Committee inquiry comes at a critical moment for the retail industry.
“If the Committee can seize the opportunity to find a way to address the madness of a system which is strangling our high streets, they can protect shops and jobs and put British retail on the right trajectory for the future.”
‘Drag on growth’
The BRC’s call comes days after Tesco boss Dave Lewis warned that retail was at a “tipping point” and urged ministers to “level the playing field” between high street and online operators.
Speaking at the British Chambers of Commerce conference, Lewis said: “We need to rethink our business rates system.
“Rates have become a rising tax on investment while profit taxes have fallen. It is a drag on growth and a drag on competitiveness.
“There’s no longer a balance between taxation and sales. As 20% of sales have gone online, the burden on business rates has stayed and increased on a declining sales base.
“That’s why I believe it is time to consider an online sales levy so that the burden of tax can follow the sales.”
Lewis added: “If the Government acts now, it could benefit millions of businesses across retail and the country, in the process saving thousands of jobs and preserving some of their social and economic value in our towns, villages and communities.
“In this nation of shopkeepers, strong retail is important for a strong Britain.”