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UK Retail Group Urges Cut on ‘Excessive’ Shops Tax

The British Retail Consortium (BRC) wants a cut in business tax burdens to prevent further store closures and job losses.

BRC is urging Chancellor Rishi Sunak, U.K.’s finance minister and the equivalent of the Treasury Secretary in the U.S., to include a cut in the shops tax as part of the government’s Autumn budget. Her Majesty’s Treasury said there will be two budgets in 2021, and the Autumn plan is set to be disclosed on Oct. 27.

“The retail trade association also urged the Chancellor to stand by his Party’s manifesto commitment to ‘cut the burden of tax on business by reducing business rates‘  through its Fundamental review, due to conclude in Autumn,” BRC said, adding that there’s no substantial reduction in place, “four out of five retailers would be forced to close additional stores across the country, further eroding the fabric of local communities.”

BRC said the need to cut the tax burden on retailers is supported by a WPI Strategy report that said the levy also stops investments in new shops, which in turn impacts retail job creation. The report also said the effects will be felt most acutely in the North of England, the Midlands and Wales, according to the BRC.

“The evidence is clear: business rates are costing shops and jobs and undermining the government’s ‘levelling up’ agenda. Retail is the UK’s largest private sector employer and serves as a vital lifeline to places most in need of levelling up, offering flexible jobs, supporting other businesses on the high street, and breathing life into local communities,” BRC CEO Helen Dickinson said.

Real estate firm Knight Frank said business rates in the U.K. are essentially a “tax on the right to occupy commercial property and typically equate to approximately 50 percent of the annual rent.” Retailers have pushed for reform, noting that the legacy business system no longer reflects the reality of the move to digital sales. Even Frasers Group chairman David Daly in August called the rates “excessive,” warning that keeping the outdated business rates system could result in the closure of some House of Fraser locations.

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According to independent economics research consultancy Retail Economics, retail sales in 2020 totaled 403 billion pounds ($549 billion). The U.K. retail sector employed 2.9 million and U.K. retail sales grew 2.2 percent last year. The proportion of retail sales made online was 28 percent in 2020, and the average annual growth of online retail sales last year was 45 percent. The total amount of retail sales in the U.K. accounts for 5 percent of the country’s gross domestic product.

The retail group is recommending a long-term reduction of the 8 billion pounds ($10.86 billion) in the annual rates tax burden on retailers, which it said has costed retailers over 500 million pounds ($678.6 million) between 2017 and 2020. BRC is also recommending the removal of the requirement for rates to raise a fixed sum and is suggesting a more flexible option in line with economic conditions that’s comparable to other tax structures. It is also pushing for a one-year “bridge” period for the 2022 to 2023 tax year that would see at least a 30 percent reduction for retail as an adjustment for the reduction in retail rents since 2015.

The recommendations are part of a “budget submission” from the BRC, which includes other retail priorities that include a debt moratorium and the current shortage of truckers. One problem that’s been talked about among retailers in connection with the driver shortage has been the inability of companies to bring in overseas workers during the run-up to the all-important holiday selling season.

Foot traffic data for the week of September 5 indicates that employees are starting to drift back to offices, according to the “Central London Back to Office Footfall Benchmark” from data specialist Springboard. That benchmark indicates a rise in footfall from the week before in many location, suggesting that many employees are still working from home. However, footfall in general decline across Central London, suggesting that some employees are returning to their offices.

For the month of September, Springboard said retail sales held steady, helped in part by the start of the return to the office. Retail footfall strengthened in September and narrowed the gap from 2019 to down 17.4 percent from down 18.6 percent in August. The gap from 2019 in high streets narrowed to down 20.3 percent in September from down 23.5 percent in August. The data firm said September benefited from a bank holiday in August that boosted high street footfall as a result of the popularity of daycations and staycations.

“As we move into the second month of Q4, we are anticipating a continued and steady increase in the return of employees to office working for at least part of the week together with the beginnings of the return of overseas tourists. The combination of which, will add further support to footfall in retail stores and destinations as we near the Christmas trading period,” said Diane Wehrle, insights director for Springboard.