BRC says more store closures on horizon without business rates reform

The British Retail Consortium has today published a new report revealing over four in five retailers will see more store closures without a reform of business rates.

The report, ‘Retail, Rates and Recovery: How business rates reform can maximise retail’s role in levelling up’, comes ahead of the Government’s Fundamental Review, and is based on a survey of leading retailers carried out by the BRC.

It revealed that 83% said they are “likely or certain to close stores” unless the review reduces the rates burden.

Business rates have had a material impact in two-thirds (67%) of store closures over the last two years, while 25% of stores paid more in business rates than in rents.

A huge 85% of retailers said that business rates is an “extremely” or “very important” issue for their businesses when opening or closing stores.

The report highlights the need for the government to take immediate action to reduce the burden placed on retailers by business rates. According to the report, this would help to “unlock the industry’s potential to support the economic recovery from the pandemic, ensuring that retail remains a provider of quality jobs and an important contributor to tax revenues for years to come.”

Helen Dickinson, Chief Executive of the British Retail Consortium, said: “Given the retail industry contributes almost £100bn to the economy (gross value added) and employs over three million people spread across the country, it has a vital role in both the UK’s economic recovery and the government’s levelling up agenda.

“This report underscores the urgency of fixing the broken business rates system, which currently hold back new jobs and investment. With one in seven shops currently shuttered, it is essential that action is taken, or else it will be our local communities and high streets which suffer the consequences.

“The government needs to bring the burden down and take action to ensure that the system reflects property market values more quickly. This should include a cut in the multiplier rate, returning it to its original rate of 35%. Furthermore, the government should introduce an improvement relief to prevent stores being immediately punished for investment into their property. At a time when the ‘Green’ agenda is so important, it is madness that business rates should rise for a firm that adds solar panels to their property.”

The report makes a number of essential recommendations aimed at encouraging investment and securing the viability of shops and high streets. The key recommendations include:

• Cutting the multiplier to its original rate of 35p in the pound (35%)
• Fixing the system of transitional relief, which cost retailers over £500m between 2017 and 2020
• Introducing an ‘Improvement Relief’ to ensure that rates bills do not rise immediately as a result of investment in a property
• Reforming the Valuation Office Agency to ensure accurate valuations and faster processing of appeals

The government announced a Fundamental Review into business rates in 2020, which will report back this autumn. The stated aims of the review include reducing the overall rates burden on businesses.

Business rates were introduced in 1990, at a rate of 34.8p in the pound. That has since risen 47% to 51.2p in the pound in 2020 (as the tax is devolved, the multiplier is slightly different in Scotland, Wales and Northern Ireland).

Retail, which accounts for 5% of the economy, pays 25% of business rates – an approximately £8bn bill for retailers across the UK. The huge cost of business rates has been a major factor in many store closures and business administrations in recent years.