Its time to level up the retail playing field

February 23, 2021:

Britains retail landscape has been changed forever by the events of the past 12 months and unless we see an immediate and drastic reform of the business rates system, theres a real danger that the high street as we know it could completely collapse.

Thats not scaremongering, its just the hard truth. You can already see it happening in many towns and cities, where the big anchor stores which traditionally attract the heaviest footfall have begun to withdraw.

New owners of established names such as Debenhams and Top Shop have been happy to snap up the brands and assets, but ominously without taking on their costly high street premises.

Many of us have been forced to switch to online shopping during the isolation of lockdown, whether weve liked it or not. And having had our eyes opened to the speed and convenience of doorstep delivery possibilities, can there be any going back?

The only hope is that town centre stores find a way to offer the same level of choice, efficiency and value as their online competitors when lockdown is over with that added X factor of a sensory visitor experience which a web shop can never deliver.

But this is only going to be possible if theyre allowed to operate on a level financial playing field, which certainly isnt the case right now.

Because a retailer with prime commercial property in a town or city centre will be paying top-notch business rates the commercial equivalent of council tax for the privilege.

On top of this, theyll also have utility, insurance and staffing bills to pay, and in many instances, might be inaccessible to shoppers without paying a hefty premium to park their cars.

Contrast this with the online retailer, operating from a giant, low-rent commercial shed on an anonymous industrial estate with none of these financial millstones, and able to deliver any time, any place, anywhere without any hidden costs to the end user.

If you were starting a retail business from scratch right now, its a no brainer which of these business models youd choose.

So Chancellor Rishi Sunak faces a real dilemma when he stands up to the deliver the Budget next week, on March 3.

He knows only too well that failing to overhaul the business rates system will dramatically hamper the ability of high streets and town centres to recover from the pandemic.

But equally, he is acutely aware that business rates deliver a ?30 billion boost to Government coffers, including around ?8 billion from retailers, which cant be easily replaced particularly after weve just chalked up the sharpest fall in GDP on record.

The bosses of big-name retailers like ASDA and Morrisons have written to Mr Sunak, warning him that the current system is not sustainable in the long term. And theyre right. Without reform, shops at the heart of communities will be at risk.

So whats the answer? For starters, perhaps the introduction of an online sales tax or levy for businesses over a certain value of turnover, say 1% or 2%, to help fund a reduction in business rates for shops. And subsidised free parking for shoppers, too?

Time and again, successive governments have promised a full review of the business rates system, which is based on draconian, decades-old principles from a bygone age.

Temporary tax relief which the Chancellor granted to retailers as part of the first wave of Covid-19 support has given them a glimpse of what a levy-free landscape could look like.

But lets hope that something with more permanent foundations can be found going forward, and that the Government hasnt left this rebalancing act too late, with the retail horse having already bolted.