As town centres up and down the country continue to struggle, over fifty major retailers are calling on the Government to take steps towards fundamental business rates reform in the Budget.
The letter, coordinated by the British Retail Consortium, focuses on fixing transitional relief – a component of the business rates system.
As the Bedford Independent reported, due to transitional relief, Beales department store is believed to have overpaid £1m on business rates.
This had contributed to the group closing 12 of its properties, including their Bedford store.
Beales will join other chains including BHS, M&S, GAME, Gourmet Burger Kitchen, Mexi-Co, DW Sports and TopShop to leave empty shops in the town centre. River Island will close by the end of the month.
Business rates are based on the rateable value of a property. Transitional relief limits the speed at which a firm’s business rates liability changes (their rates go up or down) in response to changes in its rateable value.
To achieve this, it staggers the speed at which ‘underpayers’ move to their higher business rate liability (upwards transition), and funds this by slowing the speed at which ‘overpayers’ move to their lower liability (downwards phasing).
Therefore, properties where business rates have dropped – like Bedford – are subsidising businesses in thriving retail areas.
Locations outside London are estimated to have subsidised London businesses to the tune of £596m net over the last three years.
Retail accounts for 5% of the UK economy, yet is burdened with 10% of all business taxes, and 25% of business rates.
The letter has been signed by 52 major retailers and associated trade bodies including the CEOs of supermarkets, food-to-go, fashion, homeware, and department store retailers.
Businesses that operate in Bedford town centre that have supported the letter include: Boots, Poundland, Primark, River Island, Greggs, New Look, Savers, Specsavers, Superdrug and KFC.
The letter states that the “burden of business rates has become unsustainable for many retailers” and that the system is broken, a view echoed by the Treasury Select Committee in October 2019.
This comes two days after the BRC-KPMG Retail Sales Monitor showed that the 12-month average sales growth fell to a record low of -0.2%4.
Helen Dickinson OBE, Chief Executive of the British Retail Consortium, 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.”
Henry Vann, Portfolio Holder for Town Centres and Planning said, “Business rates are in urgent need of reform.
“Central Government sets business rates and they are unfair both on businesses (rather than landlords) and as a system for funding Local Government.
“The detail of any reform must be looked at carefully but there is no doubt a complete overhaul is needed.”
Richard Fuller, Conservative MP for North East Bedfordshire, welcomed the challenge to the government to rethink business rates as part of the renewed focus on town centres, adding, “Retailers in towns such as Biggleswade and Sandy do a great job serving local residents but face an unfair imbalance in taxes compared with online giants such as Amazon.
“Some time ago, I calculated that Amazon paid rates that were 1/16th per square foot of those paid by a town centre retailer. That needs to change.
“I applaud the Chancellor for standing firm on a new tax on tech giants which will go some of the way to achieve a rebalance, but he should now go further to provide a significant tax reduction to businesses – retail and others – that are the heartbeat of our town centres.”