The rising cost of business rates and uncertainty around reform of the system are causing some of the UK’s largest footwear and fashion chains to scrutinise their store portfolios.
Growing costs threaten to make some stores unviable, retail bosses told Drapers this week. It comes after the British Retail Consortium warned inaction on business rates reform could see as many as 80,000 shops across all sectors shut by 2017.
Julian Dunkerton, the founder and product and brand director of SuperGroup, believes this will predominantly affect larger multiples: “It’ll be the businesses with hundreds in their portfolio who will be affected; they’ll want to get out of towns which are no longer doing well.
“I can imagine there’ll be many coming up to the end of their leases who will want to walk away from stores.”
The chief executive of one young fashion multiple said: “Every retailer is looking at the stores they have and which ones are working for them. If rates force them to close some then ultimately that’s driving unemployment.”
Colin Temple, managing director of footwear chain Schuh, played down the BRC’s warning, but agreed location will increasingly play a part: “What retailers need to do is look at the quality of the location and whether it’s right for them.”
The government has always been clear that any reforms to the business rates system will have to be fiscally neutral. Temple added: “The government is going to have to take from some people and give to others. All I want is a level playing field with other retailers in my sector and with the big guys online, who don’t have this cost.”
Peter Mace, head of central London retail at property firm Cushman & Wakefield, said the BRC figures seemed high but agreed retailers will be increasingly mindful of underperforming stores.
“I can’t see retailers closing in prime locations like London because they are like a shop window [for the business], but I can see it happening to some extent outside the capital,” he said.
“They will look at every store they have and if there are some that aren’t performing and the rates go up, making them unprofitable, they could close them.”
The BRC issued its warning after the June 12 deadline passed for submissions to a consultation on the government’s review of business rates, which is due to report by the 2016 Budget.
The BRC and Confederation of British Industry have suggested excluding properties valued at below £12,000, increasing revaluations to every three years and tying rate increases to the Consumer Price Index instead of the Retail Price Index.
A consortium of business organisations and councils, including the Chartered Institute of Public Finance and Accountancy, submitted a joint response to the consultation describing the current model as “no longer fit for purpose”.