Retailers plead for business rates overhaul

Edna B. Shearer
Asda
Asda

Retail bosses have made fresh calls for ministers to accelerate a business rates review as the end of the tax holiday looms.

Leading voices in the industry, who are part of the Retail Sector Council, have said it is imperative that the Government proceeds with an overhaul of the tax. “Property costs remain crucial issues for the sector. Making longer- term progress on business rates will be essential to give businesses the certainty to make effective investment decisions,” according to minutes from the council’s most recent meeting.

“The importance of proceeding rapidly with the rates review given the on-going pressure of the Covid-19 pandemic on the sector was emphasised [to government].”

The Retail Sector Council was set up by ministers two years ago to engage more effectively with bosses in the private sector. It is co-chaired by Paul Scully, the minister for small business, and retail veteran Richard Pennycook. Its members include Roger Burnley, Asda’s chief executive; John Rogers, the former boss of Asda and now finance chief at advertising firm WPP; Nick Beighton, Asos boss; and Doug Gurr, Amazon’s UK manager.

A business rates holiday was introduced by the Chancellor when coronavirus hit for 12 months, which has given many firms some breathing space after they were forced to shut temporarily and revenue dried up overnight.

Rishi Sunak also announced a “fundamental review” into the long-term future of the rates in his Budget speech in March, with responses due by the autumn. Retail bosses said they had written to the Government already with the feedback on the tax, but “a response has understandably yet to be received”.

Businesses have long called for an overhaul of the tax. They say they are subject to an unfairly high burden from business rates, which are based on a property’s estimated value on the rental market and can run to millions of pounds a year for department stores in prominent spots.

Julian Dunkerton, the boss of Superdry, warned in The Daily Telegraph this month that the return of the tax would unleash carnage on the high street.

Economic Intelligence newsletter SUBSCRIBER (article)
Economic Intelligence newsletter SUBSCRIBER (article)

“The next rates re-valuation will be delayed from 2021 to 2023. What this means is that when rates come back, they’ll still be based on shop rents from 2015, which bear no relation to today’s much reduced levels,” he said. “I believe this will be a disaster for the UK’s high streets.”

This year, the country’s finances were expected to get a £13bn boost from business rates. In September, a measure pushed through Parliament at the beginning of the crisis to stop landlords from kicking tenants out if they do not pay rent will expire. Retailers and restaurants are likely to have to honour those costs.

Lawyers have also said that businesses could be served with a flurry of winding-up petitions by commercial landlords seeking to recoup their cash. A few retailers have already gone bust, such as Cath Kidston, Laura Ashley and Debenhams, albeit the latter two are still trading from stores.

Others have launched insolvency processes to secure cheaper rents. About 25,000 people have been made redundant in retail since March. More recently, Marks & Spencer, John Lewis, River Island and WH Smith have all announced job cuts.

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