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'Broken' business rates take toll on high streets

The retail industry is calling for urgent action on business rates from the government as high streets across the UK prepare for another wave of store closures.

Last week Arcadia Group revealed plans to close 10 further stores across the UK in the next three months, as a result of lease expiries. Frasers Group – formerly Sports Direct International – announced the closure of a further six Jack Wills stores in the next month, after its acquisition of the lifestyle brand last August. Meanwhile, Debenhams is closing 22 stores this month and all Mothercare stores had closed by 12 January. 

New data compiled for Drapers by Local Data Company (LDC) has found that the south-east of England is at highest risk from the latest round of store closures.

Out of the proposed list of 114 closures across Jack Wills, Arcadia, Debenhams and Mothercare, more than 28 are in the region. Greater London is expected to have 15 store closures, followed by the east of England (12 stores) and north-west of England (12 stores).

 Region Store count
 East  12
 East Midlands  5
 Greater London  15
 North-east  3
 North-west  12
 Scotland  8
 Yorkshire and Humber  5
 South-east  28
 South-west  11
 Wales  4
 West Midlands  11

“The next wave of closures is definitely very worrying, particularly for those surviving retailers left on the high street,” the chairman of one high street retailer told Drapers.

“We have moved from shoppers to purchasers and the high street is taking the brunt of this, as online has become a much easier way of spending. However, the biggest issue is business rates.”

One multiple footwear CEO agreed: “It’s a terrifying thought that there will be even more stores left empty.

“High street store closures could stop if the government could stop business rates. Rents are going down, but rates aren’t. If they don’t change the rates, then even more shops will close. The government has to remove these barriers for retailers to survive.”

Department store chain Beales, which went into administration this week, is estimated to have overpaid £1.06m in business rates since 2017. It blamed the impact of high rents and rates for its downfall.

Meanwhile, Mike Ashley’s Frasers Group last week wrote to the prime minister Boris Johnson to call for an “urgent fundamental review” of business rates to prevent “desolate” high streets.

JD Sports Fashion executive chairman Peter Cowgill told Drapers property costs need to reduce to revive the UK high street: “If the market is being diluted at such a rate as a consequence of online, I can’t see how you can stimulate bricks-and-mortar [trade] without lowering the cost base.

“That burden can’t just be borne by the landlords. The rates are unrealistic and relate to a period when online wasn’t as prevalent. It is a completely different market and the cost base is out of step.”

Industry bodies told Drapers the government must act now to fix the “broken” business rates system.

“The government must address the rising cost pressures that are bearing down on British retail businesses and the people who shop there,” Helen Dickinson, chief executive of the British Retail Consortium (BRC), told Drapers.

“Our business rates system imposes huge costs on firms, regardless of whether they are in profit or in loss. This is neither fair, nor sustainable. The government must make good on its manifesto promise to reform this broken business rates system to help unlock much-needed investment in our high streets, the three million people who work there, and the burgeoning digital economy.”

Mike Cherry, national chair of the Federation of Small Businesses, agreed: “If we are to really help high street firms into the next decade, then extending measures such as the high streets relief on business rates, as well as a wider review of the system to reduce the burden on business, must be acted on sooner rather than later by the government.”

However, Preston Benson, founder of high street regeneration company Really Local Group, said business rates alone are not the death of the high street: “For decades, the high street has evolved with retail units ‘sold off’ to those willing to pay the highest rent. In many instances, these decisions were taken in boardrooms far away from the affected communities. This approach led to identikit high streets stuffed with multi(national) retail, and a bland and boring experience.

“Business rates and online platforms alone are not the death knell of the high street. It is possible to succeed with a customised, curated and complementary selection of entertainment, food and retail.”

Jake Berry, minister for the Northern Powerhouse and local growth, said: “We absolutely recognise that rapidly changing shopping habits are a challenge for high streets across the country. The government is responding by slashing business rates for small retailers and investing £3.6bn to help our town centres adapt, evolve and thrive.”


Local Data Company (LDC) store closure heat map - January 2020

Local Data Company store closure heat map, January 2020



Readers' comments (1)

  • While Business Rates do need a review, it is not the salvation that we keep hearing from the usual suspects. For most retailers, it will make little difference.

    The way business is run is dated and flawed. That is not a Government's responsibility, therefore the answer lies far closer to home.

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