The retail industry has been navigating crisis after crisis. Fresh from the pingdemic, the country found itself facing a massive HGV driver shortfall, supply chain problems and wider labour shortages.
Availability problems were then exacerbated by both a CO2 shortage and issues at petrol forecourts.
The British Retail Consortium (BRC) has spent recent weeks diligently putting out fires. Working with our members and through regular engagement with the government, as well as a few well-timed headlines, we’ve helped to deliver changes in the contact-tracing app, see the UK production of CO2 restarted and force the creation of 5,000 new visas for HGV drivers – it may not be enough, but rest assured we are not giving up any time soon.
Unfortunately, one fire continues to smoulder on, laying waste to shops and jobs alike. A fire lit 30 years ago, which has slowly spread down our high streets and is taking communities with it. It is, of course, business rates.
We all know the way people shop is changing and that there will be fewer stores in the future. It is not a case of online versus offline. Retailing is about both and while our high streets in the future should be about so much more than retail – housing, care in the community, leisure, entertainment, agile workspaces – retailing still has a part to play.
“Reform of the business rates system is the greatest step the government can take to maximise retail’s contribution to the ‘building back better’ and ‘levelling up’ agendas”
Even before the pandemic, business rates were contributing to unnecessary shop closures and job losses. Now they represent a threat to many retailers’ ability to invest in stores, jobs and new technology.
Reform of the business rates system is the greatest step the government can take to maximise retail’s contribution to the ‘building back better’ and ‘levelling up’ agendas.
The government announced a review into this broken tax at the 2020 spring Budget. The stated objective to “reduce the overall burden (the tax placed) on businesses” is exactly what is needed. But 18 months on and still we wait with bated breath to see what will be announced.
A recent BRC survey showed that four in five leading retailers were likely to have to close more stores than they would want to in the coming year unless the fundamental review cut the rates burden.
Two-thirds said rates had a material impact on decisions to close stores over the last two years.
These are figures that the government cannot afford to ignore.
Retailers are meeting the transformation in needs and behaviours of consumers head-on, adapting and embracing new technologies.
“Investment in so many new technologies is being held back by the sky-high cost of meeting outdated rates obligations”
Writing for Retail Week last week, Theo Paphitis noted: “The future is hybrid retailing… It’s not going away. Customers are now used to using technology, whether through QR codes, Apple/Google Pay, booking systems or research before in-store purchases.”
Unfortunately, investment in so many new technologies is being held back by the sky-high cost of meeting outdated rates obligations. This is why we put business rates front and centre in our latest Budget submission.
We call on the government to make three changes.
Firstly, the fundamental review of business rates must result in a substantial reduction of the £8bn-a-year tax burden weighing down retailers, as well as ending the downwards phasing transitional relief, which cost retailers more than £500m between 2017 and 2020.
Secondly, the government should remove the requirement for business rates to raise a fixed sum of money. Unlike income or corporation tax, business rates do not flex with the economy, piling the pressure on exactly when it should be softening the blow.
Finally, with the pandemic not yet over, the government should introduce a bridging relief for 2022/23 to prevent a cliff edge of 100% business rates liability just when communities are getting back on their feet after two years of turbulence.
This relief would reflect the fall in retail rental values since the last valuation and inject some much-needed market reality into the system.
The government must now decide whether it will act as a firefighter or arsonist.
Will it finally seek to repair the damage being wrought on our high streets by business rates or will it instead douse it with petrol (if it can find any), delaying this decision or ignoring it altogether and missing a vital opportunity for reform?
Will it doom our local communities from the vibrancy and investment we all deserve?
Bring out the firefighters, I say.
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