The British Retail Consortium (BRC) has issued a warning, stating that urgent reform is needed for the UK’s business rates system. This warning comes as over 80% of physical retailers may be forced to permanently close their stores. According to a survey conducted by the BRC, an overwhelming 85% of retail businesses consider business rates to be a significant issue. Furthermore, 83% of these businesses have stated that they would be likely or certain to close some of their stores if the upcoming government review did not result in lower payments.
The survey also revealed that business rates had a substantial impact on 67% of store closures over the past two years. The BRC argues that business rates have grown disproportionately in comparison to other taxes, unfairly penalizing businesses with a physical presence while giving online businesses an advantage. As a result, the trade body is urging ministers to reduce business rates to their 1990 levels, when they were first introduced, and to revise the method of property valuation to ensure accuracy.
Since the 1990s, business rates have increased from 34.8p to 51.2p per £1. This significant rise has led to retail businesses collectively incurring an £8 billion bill, as the sector is responsible for 25% of business rates. Despite the government providing business rates relief during the pandemic, the bills are still based on property values from April 2015, failing to account for the decline in property values during lockdowns. Additionally, the rates do not adequately reflect a business’s sales or profitability, as pointed out by the BRC.
While the government is expected to release the findings of a comprehensive review of business rates this autumn, the BRC emphasizes the need for urgent action. Helen Dickinson, the chief executive of the BRC, has stressed the importance of fixing the “broken” business rates system and reducing the burden on retailers. She has called on the government to ensure that the system accurately reflects property market values and to cut the multiplier rate back to its original level of 35%.
In addition to these demands, the BRC is requesting the government to introduce an “improvement relief” measure, preventing immediate increases in rates bills resulting from property investment. Furthermore, the BRC is seeking a reform of the government’s Valuation Office Agency. It is worth noting that one in four stores currently pay more in business rates than in rent, despite the tax being designed as a proportion of a property’s value.
The retail sector is a significant contributor to the UK economy, providing over three million jobs and driving approximately £400 billion in consumer spending annually. Failure to reform the business rates system could have severe consequences, including the closure of numerous physical stores and further challenges for brick-and-mortar retailers. Urgent action is needed to create a fair and sustainable business rates system that supports the growth and evolution of the retail industry.
Useful links:
1. https://www.thisismoney.co.uk/money/markets/article-9994471/Now-85-high-street-retailers-say-business-rates-burden.html
2. https://www.retailgazette.co.uk/blog/2021/09/brick-and-mortar-retail-stores-form-uk-business-rates-reform-warning
