The business rates cash now being returned to the UK government by essential retailers should now be given to help non-essential retailers and small businesses who have faced steep challenges during this year’s Covid-19 lockdowns, business advisors suggest.
Tesco, Sainsbury’s, Aldi, Lidl and Morrisons have all said this week that they will return the money they saved as a result of business rates relief introduced to help store-based retailers and members of the hospitality industry survive in the face of Covid-19. That adds up to a windfall for the government of billions. Today they were joined by Pets at Home, which said it would pay back £28.9m. Pets at Home chief executive Peter Pritchard said that having the money had given it confidence at a difficult time but could now be repaid. “We were very grateful for the rates relief provided back in March during a time of significant uncertainty, which helped us to take the decision to keep our stores, online operations and veterinary practices open,” he says. “Recent positive news around the launch of vaccinations for Covid-19 has led us to reassess the level of uncertainty ahead.”
Today commercial property agent Colliers International said the funds should be diverted to give support to those retailers who were forced to close under lockdown rules. It is calling for an extension of the business rates holiday until after the end of March 2021, and after that either a rates holiday for six months or a 50% cut for 2021/22 rates for non-essential retailers.
John Webber, head of Colliers International, said: “In a normal year, the retail sector pays a disproportionately high element of the tax take from business rates – contributing between a quarter and a third of the total £26 billion raised – or around £7.625 billion. We estimate that the main food retailers (Tesco, Sainsbury, Asda, Morrisons, Co-op Lidl and Aldi) together pay around £2 billion of this bill.
“To give the non-food retail sector a three or a six months business rates holiday next year it would cost the Government either around £1.4 billion (three months) or £2.8 billion (six months). Most of this would be covered by the supermarkets’ repayment, who themselves would this time not be included in the rates holiday.”
He added: “The view on the high street is bleak. Many shops have already closed for good and jobs have been lost. To attract retailers back onto the high street or for new retailers to open shops, there needs to be some incentive. Rent negotiations with landlords and some relief over business rates would be a start. We urge the government to start thinking laterally and to use this windfall wisely if it wants to avoid an even bleaker retail landscape as we move into the New Year.”
Richard Churchill, partner at tax and advisory firm Blick Rothenberg, says the rates holiday for retail and hospitality businesses was intended as a lifeline to help them survive. But supermarkets had not needed it and were right to return the cash, he says.
“Hopefully the government will be able to build on this good news story and provide clarity to these hardest hit businesses in retail, hospitality and leisure as they seek to rebuild in 2021," says Churchill.
“Many of these businesses have exhausted the other support measures in place and have critically low cash reserves. Knowing that their rates bill will be reduced or extinguished would be a real boost to these small businesses and allow more of them to be viable and continue to trade in 2021. “
He added: “ As other support measures come to an end and tax deferrals for 2020 become payable, cashflow will be critical for these businesses and Government should act now to provide further support and clarity for rates and give the targeted recipients of the relief time to plan.”
Essential and non-essential retailers alike have met with strong online demand during this year’s Covid-19 lockdowns. Online sales accounted for 28.5% of retail sales in October - up from 20.1% in pre-pandemic February, according to ONS figures , most sales still took place in stores. But online sales have not compensated for the loss of in-store sales, which still account for more than 70% of retail. High costs associated with running stores which have had to stay shut for four months so far this year have been a major factor in the failure of retailers, including this week alone, Arcadia Group and its eight brands from Topshop to Top Man and Burton, and Debenhams.