Retail giants to be hit by £190m business rate bill as industry fears ‘tipping point’
UK retailers are set to face a fresh tax bill worth hundreds of millions of pounds if today’s inflationary figures remain similar next month, with embattled high street businesses fearing another hefty levy could push the sector to its limits.
The British Retail Consortium (BRC) predicts that the retail sector will be slapped with a £190m bill next month when the new business rates are set, following today’s Office for National Statistics data, which shows inflation rose 2.7 per cent in August.
While the move to align business rates with a Consumer Price Index (CPI) rise, rather than a higher Retail Price Index (RPI) rise, was made last year to ease the burden on retailers, many in the industry are worried the latest business rates will still hurt beleaguered high street firms.
Read more: Inflation rises to six-month high
“We are at a tipping point right now,” said Paul Turner-Mitchell of the Altus Group.
He told City PM: “Even if the increase next month is less than 2.7 per cent, it is more about the bigger picture; over the years the compound effect becomes too much. Given the issues facing the high street and the Brexit uncertainty, the chancellor has got to be bold and freeze business rates.”
According to Altus Group, the inflationary rate rise is likely to push business rates for all firms, including retail and hospitality, in London to £263m, making it the UK region with the highest levies.
Jace Tyrrell, whose firm New West End represents retail giants along Bond Street and Oxford Street, told City PM: “Retailers do have a long-term future, but we need immediate action. We’re going to see a lot more casualties after Christmas, but some short-term relief would stop a number of stores closing up and down the country.”
Tyrell added: “Although the government has been tinkering with RPI and CPI, there has got to be a more fundamental look at taxations. We’re on the edge and it has been building up for a long time.”
Read more: Heatwave hit retail footfall figures in August
Tom Ironside, director of business and regulation at the BRC, said: “These figures would mean severe consequences for the retail industry, which is under significant pressure as it goes through a prolonged and radical period of transformation. Business rates are leading to store closures and hindering the successful reinvention of high streets.”
Ironside added: “Ministers need to act to address this £190m increase in retailers’ already unsustainable business rates bill.”
Mike Cherry, national chairman of the Federation of Small Businesses, said: “Over the long term, a serious look is needed to overhaul the unfair, regressive business rates tax that hits firms before they’ve had the chance to make their first pound of turnover, let alone profit.
“As the budget approaches, the chancellor must provide targeted support to those businesses struggling to keep their heads above water in the face of rates rises. It’s vital that businesses are given the right support, in the form of a rates freeze from April 2019 when the next inflation-linked rise is due.
“We’re calling for a £1,000 discount for local shops, pubs and eateries and other businesses on the high street, as well as the introduction of a type of ‘London weighting’ to Small Business Rate Relief to help struggling firms, by increasing thresholds for intensely-pressured areas.”