Another Letter For Rachel To Read

The British Retail Consortium (BRC) have written a letter to the Chancellor urging her to introduce what they have called a “retail rates corrector” in the budget on 30 October.

The letter, which surely must be part of a very full in-tray inside Number 11 Downing Street, has pushed for a 20% cut to business rates.  They argue that the discount would help “level the playing field” for the sector, which they claim is paying more than its fair share of tax.  BRC research suggests that retailers are paying 7.4% of all business taxes despite accounting for 4.9% of the UK’s total economic output in 2023. They say this has curbed investment and forced retailers to shut their doors, affecting local jobs.  Without the action being taken, the BRC said 17,000 shops could be forced to close over the next 10 years.

Signatories to the letter include the bosses at Tesco, M&S, Aldi, B&Q, Costa and Ikea but the total number is over 70.  However, it is likely to be the smaller independent retailers who would benefit more from such a reduction, but don’t have the clout to sign a BRC letter.

“This tax burden is having a detrimental socioeconomic impact on local communities through store closures and job losses – in two-thirds of the 6,000 store closures in the UK over the past five years, the rates bill had a material impact on the decision to close,” the letter said. “Rates are also holding back current investments we want to make in pay and upskilling our people, in new and improved stores and in the technology that will support productivity and economic growth.”

Of course, the letter is fighting against Ms Reeves now often heard “£22billion black-hole” (surely right behind Sir Keir’s father being a toolmaker in the Labour bingo card).  In one final effort to convince the Chancellor, the BRC said that the retail sector paid more than £6bn in business rates last year, meaning that a 20% discount would cost the government about £1.2bn.

The retail sector has long complained about its tax bill. However, pressure mounted over the past two years, when an increase in inflation caused business rates to rise. The UK’s September inflation figure – which in September 2023 was 6.7% – is typically used to decide the annual increase in business rates.

The request is nagging away at an area where Labour promised to act in their manifesto.  Prior to the election, Labour pledged to replace the business rates system in England with a fairer regime, saying the current arrangement disincentivised investment, created uncertainty and placed an “undue burden on our high streets”. 

The budget may be the time for the government to show its hand.