Retail Environment
Forget BREXIT – business rates could kill High Street
Despite many heralding Brexit as the key deterrent for international businesses to set up shop in the UK, new findings have revealed that the complex business rates system could be more to blame.
New figures from retail research firm Conlumino, commissioned by shopping centre giants Intu and Revo, have shown that the over complicated property tax is driving away key retailers. The survey was conducted post-Brexit, and revealed that the 130 retailers polled saw the UK’s strong labour laws, sophisticated market and leading digital infrastructure as qualities which quelled Brexit insecurity.
However, the fixed property tax which is set to rise again in April - alongside new proposed amendments limiting businesses’ power to challenge miscalculated business rates rises - was found to be top of the list preventing retailers from coming to the UK.
Retailers, including The New West End Company which represents London’s busiest shopping district, have chastised the proposed changes stating it would cost the economy greatly. More than 75,000 new jobs and £11.9 billion in rent would be seen if all 130 of those surveyed chose to enter the UK. This would also generate £6.7 billion a year in income taxes and rates towards the economy.
"Companies have to pay this fixed cost before they bring in any sales, whereas corporation tax is only charged if a company turns a profit," Intu chief executive David Fischel said.
"There is a danger that the Government takes the retail sector for granted and we employ more people than Nissan does in Sunderland. There is a perception that a retail job is inferior to a manufacturing job, but a job is a job.”
He also stressed how the sector provided entry-level jobs as well as increasingly creating skilled jobs for those with digital and online experience. Retailers across Britain face a £2.3 billion tax hike in April as many voice fears of price rises. The tax increases are set to rise by an average of £465 million per year for the next five years according to new research.
As import prices are on the rise following Brexit, and the rising Living Wage begins to come into effect, retailers warned of potentially disastrous consequences of the business rates hike, ahead of Chancellor Philip Hammond’s autumn statement in November.
Business rates are based on the value of commercial property as well as the annual rate of inflation. Retailers have warned that the levy is overwhelming them as they rely so heavily on property, on which the majority spend more tax on than they do for corporation tax.
Controversially, the Government pushed back the commercial property revaluation by two years, deviating from the usual five-year recurrence. They stated that it would create uncertainty among businesses, this will make the changes even more harshly felt when they come into effect.
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