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Four in five retailers could close stores if business rates are not reformed – with implications for multichannel services: BRC

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Four in five retailers may close stores unless business rates are reduced, new research suggests. Shops remain vital as an important part of multichannel retail strategies, offering services and fulfilment choices, such as click and collect – but are threatened by the currently high level of business rates, says the new report from the British Retail Consortium (BRC).

The BRC Retail Rates and Recovery report, published ahead of a government Fundamental Review into business rates that is due for publication this autumn, questioned more than 40 leading retailers and found that 83% say they are either likely or certain to close shops unless the rates burden is cut. It also found that business rates played a role in two-thirds (67%) of store closures in the last two years, and that this is the second most important issue that retailers consider when thinking about store closures, after rent.

“Retail is transforming due to new technology and changing shopping habits,” says the report.  “More of us are now shopping online, with online sales growing by more than a third in 2020 although this doesn’t mean the end of physical shops – far from it. Retailers increasingly see their online and offline operations as interconnected, with one supporting the other. What’s more, eight of the ten largest UK retailers operate both online and on the high street.

“In the future, the role of shops will evolve to include service provision, fulfilment and other purposes, further cementing their position as cornerstones of communities. But the viability of shops is threatened by the unsustainable rates burden.”

Business rates, introduced in 1990 at a rate of 34.8p in the pound of its rental value have now reached 51.2p in the pound. That means, says the BRC, that rates bills should come in at about 50% of rent. But for some large retailers, it says, rates account for half of their total tax bill – and 25% of stores have paid more in business rates than in rents. 

The BRC wants to see the business rates multiplier reduced to 35p. It also wants to fix the transitional relief system, and introduce an improvement relief to make sure rates bills do not rise immediately because of property investment, while also reforming the Valuation Office Agency to improve valuations and speed up appeals. 

Helen Dickinson, chief executive of the BRC, says: “This report underscores the urgency of fixing the broken business rates system, which currently hold back new jobs and investment. With one in seven shops currently shuttered, it is essential that action is taken, or else it will be our local communities and high streets which suffer the consequences. 

“The government needs to bring the burden down and take action to ensure that the system reflects property market values more quickly. This should include a cut in the multiplier rate, returning it to its original rate of 35%.”

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