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100 Stores Threatened by Property Taxes, UK Shoe Chain Boss Warns

The once-proud high street has faced more than its fair share of upheaval as retail’s digital revolution and Brexit change the calculus for brands and retailers in the United Kingdom, but a new challenge could threaten stores in the coming quarters: high business rates.

Ahead of a meeting next month when Her Majesty’s Treasury will set a budget for 2021, Shoe Zone CEO Anthony Smith sounded the alarm on BBC Radio’s “Wake Up to Money” early morning finance broadcast, claiming that the method in which the government assigns property tax rates is in “total turmoil” and could force the closure of one-fifth of the value footwear retailer’s 500-store fleet if left unchanged.

“There is a lot of talk about the regeneration and repurposing of town centers, which we are all up for,” Smith, who has occupied Shoe Zone’s chief post since 1997, told BBC Radio. “But whatever goes into those shops, the rateable value is still simply too high.”

Business rates refer to the amount of taxes levied by the government on a commercial property, paid either by the resident business or by a landlord, if the property is vacant. Retailers have urged the government to evolve these rates, according to the BBC, which reported that business rates have failed to keep in line with rents and economic realities.

“It’s a simple maths question,” said Smith, who told “Wake Up to Money” that despite falling rents, business rates had more than doubled from 26 percent to 54 percent over the past decade. “Every time a lease comes up, we’ll look at the mathematics of it. If we are not making any money out of it…the shop will unfortunately close.”

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Smaller businesses and independent retailers receive assistance from a European program, Smith continued, but the scheme’s limitations mean it has “no impact” on the retailer’s bottom line.

Still, Shoe Zone is continuing to grow, Smith said, pointing to 20 stores opening “out of town” or away from central high street locations where rents and the rateable property value are lower.

“I do agree that people are transitioning to buy online and that’s sucking up some of the overall growth in the market but that’s [not] the bit that’s hurting town centers,” Smith answered when asked if online sales may also be to blame for the possible closings. “The vast majority of retail sales are still coming from the high street.”

Smith and other high street CEOs may have to wait to learn how the government will handle business rates in the next budget. Although negotiations are set to start on March 11, Chancellor Sajid Javid’s resignation has led to doubt that the meeting will occur on schedule, the BBC said.

Based in Leicester, England, Shoe Zone operates 500 stores across the U.K. and Ireland. The low-priced footwear retailer employs about 4,000, generates about 241 million pounds ($313 million) in annual turnover and sells roughly 20 million pairs of shoes a year.