Bosses of leading UK retailers, including Tesco, Marks & Spencer, and B&Q, have written a letter to Chancellor Jeremy Hunt, calling for a freeze on their property taxes. They are seeking to avoid a potential £400 million increase in business rates that could threaten the viability of many shops and hinder the industry’s investment capacity.

A group of 44 retail leaders have joined forces to coordinate this effort through the British Retail Consortium (BRC), a trade association representing the industry. In the letter, they argue that a rise in business rates would have a detrimental impact on their businesses.

The Concerns and Impact of a Business Rates Hike

The proposed increase in business rates is due to take place in April 2024 and is tied to the inflation figure for September, which will be announced in October. Currently, this figure is forecasted at around 6%. If implemented, it would result in more than £400 million in additional annual costs for retailers.

The BRC warns that such a significant increase would create an added burden on retailers, putting pressure on pricing in stores. Furthermore, it could potentially jeopardize the Chancellor and Prime Minister’s pledge to halve inflation this year.

The letter emphasizes that the retail industry is already grappling with several challenges, including global supply chain issues. Factors such as Russia’s withdrawal from the Black Sea Grain Initiative, targeting of Ukrainian grain silos, restrictions on Indian rice exports, and ongoing labor market challenges are already increasing costs for retailers. In light of these challenges, the signatories of the letter argue that freezing the business rates multiplier at its current level would help avoid exacerbating the situation.

The Need for a Freeze on Business Rates

The letter from the retail leaders urges the Chancellor to consider freezing business rates, highlighting the unique nature of this tax. Unlike other business taxes such as corporation tax and VAT, business rates must be paid regardless of whether a firm is making a profit or a loss. This places a significant burden on retailers, as the cost remains fixed even during challenging economic times.

Helen Dickinson, Chief Executive of the BRC, underscores the importance of freezing business rates to alleviate the high costs already faced by retailers. She argues that with shop price inflation gradually decreasing over the past three months, it is crucial for the government not to add to the cost burden and undermine this progress.

Additionally, Dickinson points out that a £400 million increase in business rates would have severe consequences. It would lead to job losses, harm the economy, and diminish the vibrancy of town and city centers. She stresses that this rise in business rates could force retailers to close existing stores instead of opening new ones.

Conclusion

The call from UK retail leaders to freeze business rates aims to secure the industry’s future by preventing an upcoming £400 million increase in property taxes. They argue that such an increase would threaten many shops and hinder the industry’s capacity to invest. With the challenges already posed by global supply chain issues and other costs, freezing business rates is seen as a crucial step to support retailers and maintain stable pricing for consumers. The decision will ultimately lie with Chancellor Jeremy Hunt, who will need to consider the implications this increase would have on the retail sector, jobs, and the overall economy.