With austerity “finally coming to an end”, in the last Budget speech before Brexit, the Chancellor, Philip Hammond spoke of measures to help British businesses “invest and grow”. However, the BBC has today reported on how more than 200 UK shopping centres are “in crisis”, so how will Mr Hammond’s proposals help the high street and the larger retailers?
With the UK’s high streets going down in a blaze of what can only be described as not glory, it is clear that there are only two ways one might level the playing field: (i) to cut charges for physical traditional retailers or (ii) increase charges for online retailers.
John Rogers, chief financial officer of J Sainsbury, has previously described the current business rates system as “outdated” and “cumbersome”, which penalises retailers who focus on selling through “physical stores”. The British Retail Consortium has also been vocal in its criticism of the current “outmoded” and “anachronistic” system, and have made a number of proposals to transform the business rates system. One of those proposals would entail replacing business rates with a new tax based on energy usage. So does the new budget offer any sign of a move away from the existing business rates system that many retailers are so critical of?
Mr. Hammond will spend £900m with a view to relieving retailers of a third off of their business rates bill. Unfortunately, when you look at the details in more depth, this benefit is only available to those who’s premises have a rateable value below £51,000. The Association of Convenience Stores (ACS) is understandably delighted by this news. Mr. Hammond believes this will support around 500,000 small retailers. However, could the issue sit not with the corner stores, but with the anchor stores?
These anchor stores are responsible for the majority of the current 3.1 million retail workers in the UK and yet none will benefit from this relief. The Guardian has reported that although only 10% of stores pay over £51,000 a year in rent, they pay around 70% of the retail sectors £7.8bn annual business rates bill. These high business rates are what is driving large stores away from the high street and onto the internet. A matter of days before the budget, Debenhams in a cry for help announced that 50 stores would be closed after posting £500m losses. This will bring the total amount of UK retail space lost in 2018 to 20.3 million square feet, this includes 1500 stores and over 38,000 jobs. Debenhams are not alone in this problem. Toys R Us, House of Fraser, Mothercare and Homebase, to name but a few, have either gone into voluntary arrangements or are closing stores which will put thousands of jobs at risk.
Mr. Hammond has promised a £650m Future High Streets Fund to be co-funded by the government. This is aimed at improving infrastructure and transport whilst also looking to rejuvenate empty stores, homes and offices. The questions now is will this promise arrive in time to save the high street?
If you have any questions about the information in this article, please contact Ben Henderson on 0203 814 2020.