“Unfair burden”: UK retailers demand action to fix “broken tax system”

14 Aug 2019 --- More than 50 UK retailers, including major supermarkets and businesses from the food-to-go sector, have joined forces to demand that the UK government reforms the “broken” business rate system. They claim the current system places an unfair burden on the retail sector, including food and grocery and have written to the UK’s new Chancellor, Sajid Javid, to address the issue and fast. The demands come as the possibility of a no-deal Brexit is increasing, escalating concerns within the retail sector.

Retailers account for 5 percent of the economy, yet pay 25 percent of all business rates, says the British Retail Consortium (BRC) – and that’s why so many have come together in a letter urging Javid to put business rates at the heart of the UK government's promised new economic package. The rate has risen by 50 percent since business rates’ inception in the 1990s and 20 percent in the last decade. 

“The likelihood of a no-deal Brexit appears to be increasing, which we believe would place a considerable strain on UK retailers. In this context, the Prime Minister’s intention to pursue an economic package to boost business and investment in the UK is crucially important; we strongly believe that reform of the broken business rates system should be front and center of that package. This outdated tax is hindering our plans for investment, holding back productivity growth and detrimentally impacting communities across the country,” the letter reads. 

The retail industry is the UK’s largest private-sector employer, employing around three million people. It is undergoing a significant transformation as a result of new technologies and changing consumer behavior. Many are adapting well to this change, some less so, but all are doing so in the face of significant headwinds, including an ever-rising cumulative cost burden from public policy initiatives, which impact the sector’s ability to respond and invest, claims the BRC. 

Elements of the system, are creating a situation where market forces are not being allowed to work properly and are resulting in serious negative distortions in the transformation of the retail industry, it says. 

The UK has one of the highest commercial property taxes in the world which the sector claims is damaging the country’s competitiveness internationally and although productivity growth in retail is outpacing the rest of the economy, the industry has the potential to do so much more. 

The letter asks for four fixes that would address many of the challenges posed by business rates:

- A freeze in the business rates multiplier;
- Fixing transitional relief, which currently forces many retailers to pay more than they should;
- Introducing an ‘Improvement Relief’ for ratepayers;
- Ensuring that the Valuation Office Agency is fully resourced to do its job.

The letter also notes that implementation of these four recommendations “could be undertaken quickly, would reduce regional disparities, remove barriers to the proper working of market forces, incentivize economic investment, and cut away at least some of the bureaucracy of the current system.”

Helen Dickinson, BRC Chief Executive, adds: “These four fixes would be an important step to reform the broken business rates system which holds back investment, threatens jobs and harms our high streets. The new Government has an opportunity to unlock the full potential of retail in the UK, and the Prime Minister’s economic package provides a means to do so.”

“The fact that over fifty retail CEOs have come together on this issue should send a powerful message to Government.”

Signatures include Asda, Iceland, J Sainsbury’s, Marks & Spencer, Pret A Manger, Spar UK, The Association of Convenience Stores, The Co-operative Group and Morrison Supermarkets. 

By Gaynor Selby