The health of the British high-street retail is again under threat with increases in business costs this month, with this being a consecutive increase in business rates for England.
The Federation of Small Businesses has stated that their members could struggle because of rising business rates, as well as the implementation of the National Living Wage. These changes are a result of revaluations by the government last year that saw some bills rising in cost, but, on a more positive note, other costs decreasing.
Many companies believe they are being targeted to make up for the shortcomings of other businesses and fear they will suffer until the next revaluation in 2021. The industry as a whole is complaining about the costs they endure, with many retailers having to close brick-and-mortar stores to compensate for the high costs. Some companies, including Maplin and New Look, have publicly remarked on the problems faced by organisations in light of changing business rates, whilst industry experts are indicating the holes in the current system.
Because of the revaluation in April 2017 and the transitional relief over the revaluation period, companies will now face gradual increases to business bills over the next few years, understandably putting a huge strain on businesses to make more profit to level out the rising costs.
The government insisted that the revaluation had to be “revenue neutral” which means there were always going to be winners and losers emerging from the changes. Estimations currently put it at 510,000 businesses who will receive increases in their business rates, whilst 420,000 will remain at their current status, and a whopping 920,000 companies will actually see decreases.
Mike Cherry, national chairman of the Federation of Small Businesses, says: “Rising business rates are threatening high streets all over the country. This is a regressive tax that hits firms before they’ve made their first penny in turnover, let alone profit.”
There have been many research studies on increases in business rates and some studies are showing total retail increases exceeding £150m. In addition, the new appeals process known as ‘Check, Challenge, Appeal’ has faced severe criticism, so attempts at reducing these taxes have been hampered.
Businesses facing rises in property rates pay these increases through their local councils. The increase caps for 2018/19 currently stand at 7.5% for small commercial properties, 17.5% for medium-sized stores and 32% for large commercial spaces (plus inflationary rises that adopt the CPI index) – indicating the lean towards bigger companies facing harsher rates.
Even for those more fortunate businesses facing a reduction in rating assessment, their reductions could be phased downwards, so the benefits are not always felt immediately.
On the other hand, some businesses have felt the relief of reduced costs, which has allowed them to easily incorporate the National Living Wage into their costs. Meanwhile, several companies have welcomed more regular revaluations to encourage a fairer rating system.
In recent years, the Chancellor announced many changes of business rates at the autumn and spring statements, for example, altering the lengths of the revaluations, the appeal windows plus further rates reliefs in an attempt at boosting business, although many of these initiatives are just scratching the surface.
In the most recent Spring Statement, it was announced that the current revaluation will now conclude a year early, in 2021. The rating assessments themselves are based on hypothetical open market values and the valuation date has just been fixed at 1 April 2019. Therefore, the analysis of rental values between 2015 and 2019 will be key to estimating future bills.
The retail industry is undergoing a challenging time, with more customers steering away from the UK high street and onto their computers in search of more product variety and better prices. And it’s not just the small corner shops that are feeling the strain. Toys R Us UK and Maplin are two companies that both fell into administration; Mothercare is in talks with its banks whilst New Look is proposing to close around 60 stores, which will put further jobs at risk.
The casual dining sector is also taking a nose-dive, with beloved food chain examples such as Jamie’s Italian and Prezzo having to close many of its restaurants around the nation.
It’s safe to say a job in retail at the moment is not looking stable. An estimated 21,000 jobs are under threat in 2018 as a result of increasing business rates, the impact of Brexit on inflation and business performance, and a lack of consumer confidence. An analysis report from the Press Association saw that many redundancies have come from established chains.
Unions have placed the blame on the government, with the general secretary of the GMB union stating: “A strong economy doesn’t see job losses like this. It’s time to invest in British industry and put forward a plan for real jobs that pay a decent wage.
“It’s not rocket science, but such a level of common sense seems to be escaping ministers, who are busy concentrating on backbench Brexit squabbles, and not sorting out the economy.”
For many retail companies, a helping hand is needed to guide them through this unpredictable time. If you need advice regarding your retail business, get in touch with our retail procurement specialists today.
Article by: Paul Giness