Frasers Group today backed a call from the British Retail Consortium and 52 leading retailers on the Government to reform business rates in a way that could level up the playing field between those trading inside and outside London.
More than 50 major retailers this week called for action on to reform a business rates system that is widely seen an extra burden on high street retailers as they compete against others that sell only online. The 52 leading UK retailers who signed the BRC letter include Marks & Spencer, Sainsbury’s, Asda, Debenhams, Dixons Carphone, Morrisons, River Island and Superdrug.
Frasers Group, previously Sports Direct International, whose high street retail businesses include House of Fraser, Sports Direct, Jack Wills and Game, added its backing to the call today.
Signatories to the BRC’s letter are calling on the UK government to look at fundamentally reforming business rates in the budget. In particular, they want to see the transitional relief system fixed. Business rates are based on the rateable value of a property, and transitional relief limits how fast a business’ rates liability changes with the value of the property that trades from. That means that those who find they are now paying rates that are too high or too low compared to the value of their trading location move slowly towards the right level, in increments.
The BRC says the staggered nature of the transitional relief scheme has two effects. First, it says that it forces retailers to subsidise other industries - to the tune of £543m net over the last three years. Second, it says that businesses located outside London subsidise those in the capital – at the cost of a net £596m over the last three years.
Its call for change, signed by 52 major retailers from supermarkets and food-to-go retailers through to department stores, fashion and homewares businesses, comes soon after the BRC-KPMG Retail sales Monitor showed that average retail sales growth fell by 0.2% over the 12 months to January, while online sales grew by 2.5%. Figures from Springboard also this week shows that visitors to high streets fell by 1.8% in January, part of an overall 0.5% decline in footfall last month. Visits to retail parks and shopping centres both rose, however.
Helen Dickinson, chief executive of the BRC, said: “The future of retail is an issue that matters to people everywhere - it employs three million people and serves the needs of the entire country. Yet transitional relief undermines both the industry as a whole, and many regions that it serves. Northern high streets effectively subsidise London banks, forcing a £600m transfer of wealth to the capital; this could be used to support investment in people and technology that would benefit all parts of the UK.
“Every year retail faces higher and higher business rates bills, holding back much needed investment in an industry that is transforming at a dramatic pace. Swift action at the upcoming Budget would show the Chancellor was serious about levelling up all parts of the UK and supporting a retail industry towards realising a brighter future.”
The BRC says that retail is investing strongly in the future, spending more than £1bn on new technology in 2018, and improving productivity by 5.1% as a result – but it is being burdened by some of the highest taxes of any industry. It says that while retail accounts for 5% of the UK economy, it pays 10% of all business taxes, and 25% of business rates.
Nick Lakin, group corporate affairs director at Screwfix and B&Q owner Kingfisher, said: “Business rates are the number one tax paid by UK retailers. The tax rate is unsustainable, the system too complex and it does not reflect modern retail. Downwards transitional relief has added to this complexity and is exacerbating regional imbalances”.
Eric Mazillier, UK CEO of Decathlon, said: “The business rates system is broken and in urgent need of fundamental reform. It undermines investment in shops, damaging job creation and hurting high streets and town centres. Fixing the complex transitional relief scheme would be a good start.”
In a statement, Frasers Group said: “With the UK high street on life support, the time for reform has long since passed. Transitional relief in particular is disastrous for a great many retailers and needs to be significantly modified to at least ensure the correct amount of rates are paid by the end of transitional relief periods. The current system whereby downward transitions of just a few percent a year means that the correct amount is never reached or even close to, punishes those in greatest need of relief.
“Within the Frasers Group itself we have some stores paying up to four times the rates bills they should be. This kind of pattern clearly cannot be right and is no doubt repeated widely across UK Retail; it is a significant contributor to the dire straits the High Street currently finds itself in.”
The BRC will hope that the letter, addressed to Chancellor Sajid Javid, is taken up instead by Rishi Sunak, his successor in the post. Sunak was appointed to the role after Javid yesterday resigned during Prime Minister Boris Johnson’s cabinet reshuffle.
Image: InternetRetailing Media/Paul Skeldon