Ahead of what is expected to be one of the most consequential budgets in several years, retailers are making a combined pitch to plead for a reduction of business rates.
More than 70 retailers including Marks & Spencer, Ikea and Tesco have co-signed a letter to the Chancellor asking for a 20% cut to business rates and warning that a property tax could force tens of thousands of outlets to close their doors permanently.
The letter, arranged by the trade organisation the British Retail Consortium (BRC), wants the Treasury to introduce a “retail rates corrector” on the levy which local councils measure based on property values of businesses including retailers, pubs, factories and offices.
BRC argued that a 20% discount would “level the playing field” for the sector claiming that retailers pay 7.4% of all business taxes despite accounting for 4.9% of the UK’s total economic output in 2023. They claim that this imbalance has curbed investment and lost local jobs as retailers had been forced to close.
The BRC said that the retail sector paid more than £6 billion in business rates last year, meaning that a 20% discount would cost the government about £1.2 billion which would be a tough sell in an environment when the Chancellor will be trying to raise money.
The letter continues: “This tax burden is having a detrimental socioeconomic impact on local communities through store closures and job losses – and in two-thirds of the 6,000 store closures in the UK over the past five years, the rates bill had a material impact on the decision to close.
“Rates are also holding back current investments we want to make in pay and upskilling our people, in new and improved stores and in the technology that will support productivity and economic growth.
The letter was also signed by senior managers and CEOs from B&Q and Costa Coffee.
In their pre-election manifesto, Labour pledged to replaced the business rates system in England with a fairer regime, saying the current arrangement disincentive investment, created uncertainty and placed an “undue burden on our high streets”, but has yet to outline or publish any proposals on what a new system will look like.
Helen Dickinson, chief executive of the BRC said: “Retail has been the golden goose, generating tax revenues far beyond the industry’s size, but the current situation is not sustainable.
“The government should act to rebalance the system and ensure all industries are paying their fair share. This in turn would drive increased retail investment in people, places and communities. The budget is the perfect opportunity to lay the groundwork for local investment that delivers for retail’s customers, delivers for its employees and delivers for the economy.”
The appeal comes against the backdrop of monthly footfall rising for the first time in over a year in September.
The BRC reported that year-on-year footfall increased by 0.9%, following a 0.4% fall in August. This is the first time that footfall has shown an improvement since July 2023.
The figures will raise hopes that along with positive news coming out of the Budget at the end of October, consumers will continue to spend in the final three months of the year to help retailers finish 2024 strongly.
We’ve outlined the speculation and worry around Capital Gains Tax (CGT) and potential changes to Business Asset Disposal Relief (BADR) recently but as the BRC’s letter indicates, businesses in every sector are forming ranks to influence leaders.
Fortunately you don’t have to rely on a trade organisation or having to write public letters to change your circumstances.
Get in touch with us today and we’ll arrange a free consultation with one of our team of expert advisors.
They’ll be able to outline various options and decisions you can make to improve circumstances for your company, some almost immediately.