The business rates system is “unsustainable” and needs “urgent reform”, Tesco chief executive Dave Lewis said today (November 9).
Speaking at the Confederation of British Industry’s annual conference in London, Lewis said retailers could not cope with high business rates at a time of “historically low profitability”.
“In supermarkets profitability has sunk from 5% to 2% in five years and now we face significant new cost pressure. Over the last five years, property values have fallen, profits are down, but business rates are up. That’s an enormous pressure: shops closed, businesses lost, jobs sacrificed.”
He revealed that Tesco’s business rates bill has increased by more than 35% over the last five years. It is the biggest tax the supermarket pays.
Lewis warned the government to be “careful and strategic” when it comes to regulation and taxation.
The chief executive, who described his first year at the helm of Tesco as a “baptism of fire”, said ministers “at the highest level” should sit down and consult on the multiple policy changes that are affecting the industry, from higher rates to the living wage and initiatives such as the apprenticeship levy.
“I’d like to find a way to be constructive and open-minded on all sides, recognising changing dynamics, taking account of those new realities, consulting to iron out unintended consequences. With the ultimate prize: more stable, sustainable growth and a better deal for taxpayers.”
Lewis said he is a supporter of the national living wage, which will come into effect in April, and see all employees over the age of 25 receiving £7.20 an hour.
“Our colleagues are the greatest asset we have. Their quality, unrelenting commitment and passion for doing the right thing are at the heart of our business turnaround. At Tesco we have a good history of paying well – our pay and benefits package is already significantly above the new voluntary living wage rate [on average, Tesco pays employees outside of London £8.80 per hour].”
However, Lewis said he is concerned about increasing wages at the expense of benefits: “We don’t think this is the answer. We shouldn’t simply strip down employment to an hourly rate or draw arbitrary lines. It’s more complex than that. Benefits are hugely important to our colleagues.
”We need a fuller debate aimed at doing the right thing for the people in our industry, without imposing more cost without providing individual benefit or business return.”