Retail leaders are calling on Chancellor Rachel Reeves to fulfill her promise to alleviate the business rates burden on high street enterprises as a looming £2.7 billion tax increase threatens to impact primarily smaller retail, leisure, and hospitality businesses.
According to analysis from Altus Group, a real estate intelligence firm, over 252,000 establishments, including shops, cafes, pubs, restaurants, and entertainment venues like bowling alleys, will experience a significant rise in property taxes starting in April. This tax increase comes as the existing 75% relief, capped at £110,000, is set to expire.
The report highlights that business rate payers across all sectors will collectively face a £545 million increase, with £250 million of that burden falling squarely on the retail, leisure, and hospitality industries.
Andrew Goodacre, CEO of the British Independent Retailers Association (Bira), emphasized the critical need for the Chancellor to extend the reliefs for retail and hospitality sectors. “This support is vital for revitalizing and nurturing growth within our high streets,” he stated.
Alex Probyn, Altus Group’s president of property tax, added that, despite the ongoing £22 billion shortfall in the nation’s public finances, the Chancellor must act to prevent a sudden fiscal cliff for these sectors in the upcoming budget. He urged the government to honor Labour’s pledge to reduce the excessive burdens placed on high streets.
The retail industry has long criticized its business rates, with former Conservative Chancellor George Osborne initiating a consultation on reform back in 2015. While some relief measures were introduced for smaller businesses, broader changes are still sought to help them compete against online retailers.
The past two years have seen mounting pressure on retailers due to rising inflation, which has caused business rates to spike, while foot traffic to high streets has yet to return to pre-pandemic levels.
Currently, the UK’s inflation rate for September is projected to be around 2%, down from 6.7% last year. This figure is crucial for determining the annual adjustment to underlying business rates, with official numbers due for release on Wednesday.
In its pre-election manifesto, Labour promised to replace England’s business rates system with a fairer alternative, arguing that the existing framework discourages investment and imposes an unreasonable burden on high streets. However, details about the proposed system remain unclear.
A government spokesperson reiterated its commitment to supporting businesses through pledges aimed at making the business rates system fairer, maintaining corporation tax at 25%, and publishing a roadmap for business taxation to instill confidence in future investments.
Recently, over 70 retailers, including major names like Tesco, Marks & Spencer, and Ikea, sent a letter to the Chancellor urging a 20% cut in business rates. They warned that without action, the property tax could lead to the closure of tens of thousands of shops.
Coordinated by the British Retail Consortium (BRC), this letter advocates for a “retail rates corrector” on the levy, which is assessed by local councils based on property rent costs across various sectors, from warehouses to retail locations.
While the BRC is not advocating for a continuation of relief for smaller businesses, it is pushing for a blanket 20% discount on all retail properties to create a more equitable environment for the sector, which it argues is shouldering an unfair share of tax liabilities.
BRC Chief Executive Helen Dickinson emphasized the importance of avoiding a “business rates cliff edge” as the current relief scheme approaches its conclusion. She noted that the existing business rates framework significantly hampers local investment opportunities for retailers, stifling the creation of new shops and jobs.
A 20% discount, she argued, would rectify the disproportionate burden faced by high streets.
Research from the BRC indicates that retailers contributed 7.4% of all business taxes in 2023, despite accounting for only 4.9% of the UK’s overall economic output.
This situation underscores the pressing challenges faced by the retail sector as it navigates a complex tax landscape amid shifting economic conditions.
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