Frasers Group says it may need to close shops after disappointing levels of business rates relief were announced in the budget.
The retailer says the £2m rates cap on business rates relief, set to be discounted by two-thirds between July 2021 and March 2022, makes the support package unveiled in this week’s budget “near worthless” for large retailers.
This means, it says, that not only will it be nearly impossible for it to take on former Debenhams sites and create jobs by running them, but it will need to look again at its whole portfolio to see which stores are made unviable by “unrealistic” business rates.
Frasers Group says in a statement today, “The Frasers Group wishes to note its disappointment at the business rates relief announced. Whilst the retail industry as a whole has repeatedly asked for structural reform of business rates, none has been forthcoming. Frasers Group and many retailers would have expected suitable relief until structural reform is implemented.”
It adds: “Frasers Group believes that retailers should pay the fair amount of rates in line with realistic rateable values, but instead we continue to have an unwieldy, overly complex and out of date business rates regime.”
This week, British Retail Consortium (BRC) chief executive Helen Dickinson welcomed the extension of the funding schemes for businesses affected by Covid-19 lockdowns – but said the devil would be in the detail. She added: “The Chancellor has taken steps to avoid the business rates cliff edge on 1 April, and the three-month extension will provide essential funding at this challenging time. Beyond this point, relief is capped at only £2m for closed businesses, a tiny fraction of their total liability. Without further funding, it is likely that many ‘non-essential’ retailers will struggle under sluggish consumer demand and high Covid costs. The business rates system remains broken; it is vital that the ongoing business rates review delivers on its promise to reduce the burden on retail which already results in store closures and job losses.”
Last week, Frasers Group said the costs of Covid-19 lockdowns to its business could come to more than £100m in the second half of its financial year alone. If so, its asset writedowns for the year would come to at least £224.9m, following a first-half impairment provision of more than £120m. The comments were in response to Prime Minister Boris Johnson’s announcement that non-essential shops would not be able to reopen their doors before April 12.
Frasers Group is particularly reliant on high street sales, having expanded through a strategy of buying ailing retailers out of administration in recent years. In 2018 it bought department store House of Fraser and Evans cycles out of administration, before going on in 2019 to buy Game and Jack Wills.
Game and Evans Cycles are Top50 retailers in the latest RXUK Top500 research, while House of Fraser and Jack Wills are ranked Top100, and its original Sports Direct business is a Top250 retailer.