Business rates experts despair as Chancellor misses the point and gives total lack of support to major retailers as bloodbath continues on the high street
News that Chancellor Phillip Hammond is set to announce a £1.5 billion boost to small high street retailers in the Budget today will not solve the bloodbath on the high street, in terms of store closures and job losses according to John Webber, Head of Business Rates at Colliers International, who brands it “wide of the mark.”
The Chancellor’s package is said to include £900 million in business rates relief for nearly 500,000 small businesses and a pot of nearly £650 million to rejuvenate high streets and their transport links. It claims that the new business rates relief, targeted at small retailers could knock a third off their bills.
But, according to Webber, the Chancellor is aiming at the wrong target if he wants to stem the massive loss of jobs in the retail sector, which have come mainly from the big struggling store chains.
Webber points to research that shows that plans announced this week to close 50 Debenhams shops coupled with Gourmet Burger Kitchen’s plans to axe 17 restaurants brings the total amount of UK retail space lost in 2018 to an enormous 20.3 million sq ft , across 1500 stores and effecting 38,000 jobs, the worst figures for a decade.
Yet the Chancellor’s measures aim to help those businesses with a rateable value (RV) of up to £51,000, and give no concessions to those that have an RV that is higher -and that’s where the big retailers lie -and that’s where the pain is at the moment.
“It beggars belief that whilst businesses are set to face a £600 million business rates bill rise in 2019, £200 million of which will be paid by the retail sector, the Chancellor thinks it’s enough to purely offer a giveaway to businesses who in most cases already receive small business relief and to do nothing to help the big retail employers.”
“The high street will still be "hamstrung" by ineffective measures.”
2018 has indeed seen the highest number of store closures since Woolworths failed in 2018. Toys R Us, Maplin, House of Fraser and Homebase, for example, have either gone into CVA or are set to close stores putting thousands of jobs at risk.
Colliers has been following those sizeable retailers or restaurant chains (with more than 10 stores) that have announced CVAs since the 2017 Business Rates Revaluation and believes the number is now in the mid-30s. This does not include Marks and Spencer or Debenhams who are not in CVA but have announced they are struggling and will need to close stores and make redundancies. Last week Debenhams alone announced it would be closing 50-a third of its stores putting another 4000 jobs at risk.
“What is frightening is that none of the stores on our list of CVAs would have benefited from what the Chancellor is proposing.”
Webber continued “Retail pain is obviously not solely down to the business rates hike many retailers saw in the 2017 Revaluation. Poor management structures, in some cases an over-sell to private equity, rising costs of good and workers and of course the rise of internet sales have all contributed to their difficulties.
But property costs and business rate rises have played their part and the big retailers have been particularly hard hit, either seeing massive rate rises (tied to seven-year rent rises 2008-2015) or, if their rates bills were due to fall are still paying too much because of the policy of 4-year downward phasing for rates to find their true level. This has kept rate bills in many poor parts of the country artificially high- something retailers can’t afford.”
It is these issues, plus how to compete with the big internet retailers, that Colliers and other business rates experts had hoped the Chancellor would address in his Budget.
“At the very least we hoped he would freeze any business rates increases next year- not the unsustainable 49% for top rises currently planned. And it was rumoured he would remove downward phasing, enabling rate payers to pay their true rates liability now and not wait four years to do so. We believe addressing this issue could have a major impact on several decisions to either close or keep open stores in a number of regional high streets. And of course, all this impacts on jobs. Observers claim over 50,000 jobs are at risk.”
“What we need to see is proper business rates reform, a proper look at reliefs and rating deserts, a fairer system of how the tax take is funded across all sectors and a rebasing of the multiplier so that rates bills are not an effective 50% tax. “
“It looks like the Chancellor will be proposing none of those things with his ineffective measures. Whilst we don’t disagree that the independent retailer needs some support, if all he is going to do is what has been reported over the weekend, we can only question the Chancellor’s commitment to helping the high street. This smacks of protecting Little England. I fear the bloodbath on the high street is only going to get deeper.”