The retail industry has called for the chancellor to urgently review business rates to maintain the UK’s competitive position in the international market, as vacancy rates hit a four-year high and a no-deal Brexit looms on the horizon.
In a letter to chancellor Sajid Javid this week, more than 50 high street retailers including Ann Summers, Debenhams, John Lewis Partnership, Harrods, Marks & Spencer and Primark demanded “a wholesale review of business taxes to create a tax regime fit for the 21st century”.
The four “fixes” proposed by the signatories comprise: a freeze on the business rates multiplier; geographically aligned rates; the introduction of improvement relief to promote investment; and support for the Valuation Office Agency (VOA) to resolve the 16,000 appeals dating back to 2010.
“It’s a climate of survival and the government is being totally unreceptive because they don’t have any idea how to rectify the problem,” Michael Ward, managing director of Harrods, told Drapers. “I don’t think this is a really difficult issue. An assessment of the whole system is needed, and it has to be part of a total fiscal change. You only have to look at the number of store closures to decide whether it’s an issue or not.”
The letter comes as the national town centre vacancy rate reached its highest level in four years: hitting 10.3% for the month of July.
The retail industry accounts for 5% of the UK economy, yet pays 10% of all business taxes and 25% of business rates.
Steve Rowe, chief executive of Marks & Spencer, said it was an “unfair burden on the industry” and directly contributed to the challenges facing the high street.
He added: “We believe these challenges will continue until the system is reformed to create a level playing field between high street and online retailers.”
A spokesman for John Lewis Partnership agreed: “The John Lewis Partnership pays £179m in business rates, and, while we are proud of our tax contribution to the UK, at present the current taxation system weighs very heavily on companies that employ large numbers of people and use property taxation intensively.
“One of the most immediate problems that we would welcome them to look as is the significant backlog of appeals in the system, held by the VOA.”
Dominic Curran, property policy adviser at the British Retail Consortium, which co-ordinated the letter, said urgent action was needed, but was confident retailers’ demands would be heard: “The changes needed to have been made a while ago, but we now have a perfect storm of the ongoing retail transformation combined with a contracting economy and Brexit uncertainty, and the new administration has expressed an interest to produce this new economic stimulus package [aimed at mitigating the effects of Brexit].”
Matt Ogg, policy adviser at retail property association Revo, agreed that Brexit is “an opportunity and watershed moment to redraft [business rates] legislation”.
Meanwhile, industry experts are concerned business rates breaks in company voluntary arrangements (CVAs) are putting further pressure on healthy retailers.
The business rates holidays granted as part of Arcadia Group and Debenhams’ CVAs will have written off more than £30m in business rates, noted commercial property services firm Colliers International.
“Now the model has been set, every CVA document will mention business rates, putting more pressure on the successful retailers who are left behind which [could] result in their demise,” said head of business rates at Colliers, John Webber.
Moss Bros chief executive Brian Brick agreed: “It should be a level playing field. If councils take a view for some businesses, they should take that view for everybody.
“The system is antiquated: rates need to drop, and rents need to come down. To me, CVA rates both on rents and business rates are the market valuation – they are not special, that’s the market.”