RETAIL ENVIRONMENT
Taxpayers foot the bill for failing stores
Failing stores are costing UK taxpayers hundreds of millions of pounds, according to new figures.
UK taxpayers footed a £300 million bill in pay-outs to staff hit by a wave of insolvencies resulting from store closures across the retail sector in 2018.
A Freedom of Information (FOI) request made by real estate adviser Altus found that the cost of insolvencies processed by the Insolvency Service rose by 31 per cent last year, with payments totalling £298 million – the highest figure since 2013.
The growing cost of redundancy pay-out by the Insolvency Service, an agency of the Department for Business, Energy & Industrial Strategy, was up by £70 million on the £227 million paid out in 2017, driven by the increasing number of High Street chains entering into administration, liquidation, Company Voluntary Arrangement (CVA), or another form of corporate insolvency.
A total of £196 million was paid out in redundancy pay whilst £59 million was for money that would have been earned working a notice period.
Bricks and mortar retailers across the UK - including House of Fraser, Debenhams, M&S and Toys R Us - have announced store closures due to tough trading conditions in the last 12 months, leading to thousands of retail roles being made redundant.
The Ministry of Housing, Communities & Local Government confirmed that it expects councils in England to collect £25 billion in business rates in April for 2019/20, up £206 million with the standard tax rate exceeding 50 per cent for the first time in April.
Industry body the British Retail Consortium has issued repeated warnings about the impact of business rate rises and Brexit-related uncertainty on the woes of the UK’s High Street.
This month, MPs used a report on the subject to warn that unless urgent action is taken, further deterioration, loss of visitors and dereliction may lead to some high streets disappearing altogether.
Robert Hayton, head of UK business rates at Altus Group, said: “Whilst business rates are rarely the sole driver for insolvencies, they certainly are a contributory factor and government needs to fully understand the impact of the actual level of this tax on businesses not just for those on the high street but across all sectors.”
He added: “Could lowering the level of business rates actually reduce insolvencies negating these associated costs and the distress caused?”
