OVER 400 big stores are at risk of closure under Labour’s plans to hike business rates.
Analysis carried out by the British Retail Consortium suggested that 400 large-format stores, such as department stores and supermarkets, were at risk of closure.
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The retail body is concerned by Rachel Reeves plans to increase business rates on larger stores, which is likely to be confirmed at the next budget.
As part of the move, larger stores with a rateable value greater than £500,000 would be subjected to an additional charge.
The BRC identified 4000 stores which would be subject to the higher tax rate.
And analysis of previous tax increases and subsequent store losses suggests that up to 400 of these sites would be at risk of closing for good.
The BRC said “like all of retail”, these stores were already under pressure from soaring employment costs, high taxes, and rising rates bills, driving the closure of 1,000 such outlets over the last five years.
It said the retail industry accounted for 5% of the economy yet paid more than 20% of all business rates bills, with large stores paying around a third of the total bill.
The group said given the small profit margins that existed across retail – around 2% to 4% for food – a significant rise in rates for large stores would force these shops to raise their prices, employ fewer people, or even close their doors entirely.
The BRC is calling on the Chancellor to use the autumn Budget to deliver changes “without simply shifting the cost onto larger stores – which would be massively damaging to our high streets”.
It suggested this could be done without cost to the public purse by removing those stores from the new higher business rates tax band and slightly increasing the rates to be paid by the remaining large properties like office blocks and other big commercial buildings.
The group said this where business rates were a smaller share of costs and the knock-on impact on jobs and prices was lower.
Helen Dickinson, chief executive at BRC, said: “Britain’s largest shops are magnets, pulling people into high streets, shopping centres and retail parks, supporting thousands of surrounding cafes, restaurants and smaller and independent shops.
“After years of rising costs, far too many stores have disappeared – leaving behind empty shells that once thrived at the heart of our communities.
“Four hundred more large stores could disappear if the Government forces them into its new higher tax band. This would mean up to 100,000 jobs lost, emptier high streets, and less revenue for the Exchequer.”
The BRC’s warning follows the Chancellor revealing plans to consider business rates reforms including removing “cliff edges” for small firms.
It comes after high street and supermarket giants including Tesco and Boots issued a warning over price hikes ahead of tax raids.
The letter, signed by Morrisons, Aldi and JD Sports, warned that further tax rises on businesses could result in the Labour Government breaking its manifesto pledge to provide “high living standards”.
RETAIL PAIN IN 2025
The British Retail Consortium has predicted that the Treasury’s hike to employer NICs will cost the retail sector £2.3billion.
Research by the British Chambers of Commerce shows that more than half of companies plan to raise prices by early April.
A survey of more than 4,800 firms found that 55% expect prices to increase in the next three months, up from 39% in a similar poll conducted in the latter half of 2024.
Three-quarters of companies cited the cost of employing people as their primary financial pressure.
The Centre for Retail Research (CRR) has also warned that around 17,350 retail sites are expected to shut down this year.
It comes on the back of a tough 2024 when 13,000 shops closed their doors for good, already a 28% increase on the previous year.
Professor Joshua Bamfield, director of the CRR said: “The results for 2024 show that although the outcomes for store closures overall were not as poor as in either 2020 or 2022, they are still disconcerting, with worse set to come in 2025.”
Professor Bamfield has also warned of a bleak outlook for 2025, predicting that as many as 202,000 jobs could be lost in the sector.
“By increasing both the costs of running stores and the costs on each consumer’s household it is highly likely that we will see retail job losses eclipse the height of the pandemic in 2020.”
Many businesses have already seen their labour costs rise thanks to the rate of employer national insurance being increased in last year’s Budget.
Employer National Insurance contributions (NIC) were bumped up from 13.8% to 15% and the threshold at which they are paid lowered from £9,100 to £5,000 in April.
Changes toNIC are estimated to raise between £14.6billion and £18.3billion a year.
Some retailers have blamed the tax hike for the decision to raise prices in shops, which they say has allowed them to partly mitigate the impact.
Why is the Treasury looking to make changes to business rates?
The Treasury is looking at changes to the current system of business rates – the tax on UK business properties – as part of efforts to cut red tape and improve growth.
In an initial report into business rates, the Treasury said it would consider overhauling small business rates relief rules which “can discourage” expansion and investment.
It is understood bosses of major high street firms, such as John Lewis, met with Chancellor Rachel Reeves last week and encouraged a shake-up of current business rates rules.
Firms saw business rates bills increase earlier this year after an original 75% discount on rates payments for hospitality, retail and leisure firms was reduced to 40% in April.
