UK | Sainsbury’s and USDAW have urged the new Government to deliver on its promise to reform business rates.
Research by Development Economics demonstrated that failure to act could lead to 17,300 retail closures over the next ten years. The research also raised concerns about the previous Government’s decision to remove the freeze on the ‘multiplier’—the rate in the pound at which business rates are charged.
The increase will cost businesses £1.6bn in the first year alone, with over a quarter of this falling on the hard-pressed retail sector. The report said it would hurt businesses and retail industry employees, with 4,300 retail jobs set to be lost in 2024/25.
The taxpayer would also lose out. If the Government continues on its current trajectory of annual inflationary increases to the tax, it would make otherwise profitable retail stores unviable and result in an estimated 17,300 closures by 2033/34.
“All responsible retailers want to pay their fair share of tax, but the current business rates system has become an enormous burden on our industry. It is no longer fit for purpose. It has failed to keep pace with significant changes in how customers are now shopping and how much our retail industry has changed over the last decade. As a result, it is directly causing store closures and job losses across the sector,” said Simon Roberts, Chief Executive of Sainsbury's.
“We believe there is a better way - one that will contribute to higher economic growth and help our communities to thrive. Today’s report shows that reducing business rates would enable businesses to invest in more stores, creating jobs and generating prosperity. We welcome the new Government’s manifesto commitment to reform business rates. We hope it will move quickly to deliver on this promise, delivering real benefits for communities, employees and businesses alike.”
The study found that over the next decade, this would cost the taxpayer almost £5.5bn in lost tax revenue, which could be invested in schools or the NHS. However, the report has shown that there is another way.
It found that a 20 percent headline cut to retail business rates would generate more net revenue for the taxpayer because more stores would thrive and businesses would invest more.
Development Economics also estimated that, within ten years, the Exchequer would generate additional business rate revenues of £70m per year with such a reform.
A 20 percent cut would also protect and create over 17,000 retail jobs that might otherwise be threatened and benefit the UK’s hard-pressed high streets. These high streets rely on the pull of major retailers to support other economic activity in their town centres. It would also boost GVA by £400 million annually.
“The scale of the challenge the retail industry faces is vast, with very high numbers of job losses and store closures that are scarring our high streets and communities. A robust plan is needed for the future of retail work that addresses the immediate and urgent priorities facing the industry and staff and broader measures to help deliver better jobs. We need a coordinated and inclusive approach involving all key stakeholders,” said Paddy Lillis, General Secretary of USDAW.
“The current business rates system is not fit for purpose, as it places bricks and mortar retailers at a significant disadvantage to online retail. This amounts to an unfair tax on shops, and action has to be taken to level the playing field.”
Lillis said they recommended the Labour Government's manifesto commitment to take action on this issue and were keen to work with the Government and businesses to ensure that business rates were replaced with a fairer system that allows high streets, towns and cities to thrive.
“Only by working together can we help to deliver the better jobs retail workers need and deserve while securing the industry's future viability for the benefit of customers, workers, communities and our economy.”
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