Retailers could be hit with almost £300m in extra business rates next year, according to estimations from the British Retail Consortium (BRC).
The BRC’s initial calculations reveal that September’s retail price index (RPI) inflation could jump by 3.3%, although this forecast is subject to change. July’s RPI was 3.1% and in June it hit 3.3%
This would mean that business rates, which are based on September’s RPI, would surge, adding £294m to retailers’ rates bills when new increases come into force in April 2014.
The 3.3% rise follows three years of onorous increases, which have already burdened retailers with more than £500m in additional rates. This year business rates increased 2.6%, adding an extra £175m to rates costs.
Business rates are viewed as one of the most crippling issues facing the retail sector due to the pressure they put on investment and growth and many retailers have openly expressed their criticism of the rates system. In addition, it has been flagged in Westminster several times as a key concern for companies across all industries.
The BRC and Retail Week have been urging the Government to ease the pressure business rates have been imposing on retailers through the Fair Rates for Retail campaign.
Until recently, the BRC had been campaigning to freeze business rates, but it has now abandoned this in favour of a 2% cap, aligning itself with the CBI, as revealed by Retail Week yesterday.
BRC director general Helen Dickinson said the strategy change was taken because the fight for a freeze on business rates “felt like an unrealistic task”.
In a column written for Retail Week she added: “Far from making a u-turn, we’re actually stepping up a gear, by refocusing our energies on what we think will deliver the biggest long-term benefits for retailers and the communities they serve.
“BRC members have told me loud and clear that the rates system is unfit for purpose, and fundamentally out of step with the way the industry operates in the 21st Century. Getting it right once and for all will be a complex and lengthy exercise, but it’s one which will deliver far greater gains in the long run.”
Retailers have expressed mixed reactions to the BRC’s change of direction.
Ann Summers chief executive Jacqueline Gold said: “Whilst I’m supportive of the work the BRC are doing for the long-term reform of the business rates system, I’m very surprised with their change in stance from freezing to capping business rates for the next year.
“Business rates are a significant cost to retail and with the high street under ever increasing pressure from multi-channel customer shopping approaches, any increase in cost will make the high street less profitable and will add to the challenges in the future.”
But Alliance Boots chief executive of health and beauty Alex Gourlay supported the move.
He said: “We have to do something about business rates because they are causing damage to the high street. The answer is not to jump at every solution and push the burdon on to someone else. I think my view is that the BRC and Helen Dickinson will be working very hard to understand the view of the industry. I trust the BRC’s judgement.”