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Business Rates: One of the Four Horsemen of the "Retail Apocalypse"?

 

By John Catchpole

Business rates have been lambasted by high street retailers for years and, at a time when more and more retailers are facing serious financial difficulties, the calls for this tax to be overhauled are getting louder. But business rates are just one of four key challenges facing bricks and mortar retailers, along with a drop in consumer confidence, increasing operating costs (linked to the national living wage and the apprenticeship levy) and threat from on-line competition.

(There are of course more problems facing retailers than the four I have highlighted, but that wouldn't have fitted neatly with my headline…).

Whilst the business rates system is widely recognised as imperfect and fails to reflect the recent changes to the retail market, even if it were possible to find a way of treating town centre retail differently to give it a fighting chance, all that would do is create a two tier retail market, with high street retailers becoming reliant on tax reliefs. This would leave the industry (and town centres) dangerously exposed to a change in policy by a future government (just as the renewable energy market was largely caught out when the government changed the feed-in-tariff regime).

In the long run, it would be better for retailers to focus on developing their omni-channel service and to provide the "experience" from their stores that bricks and mortar retailers are increasingly required to deliver in order to attract customers.

Placing the sole blame for a very complex and multifaceted issue on a single piece of legislation is always going to be reductionist, and could cause more problems than it solves. That said, unlike wider economic burdens that cannot be controlled, such as customers’ exodus away from physical retail or the fall in the value of the pound, business rates stands out as a seemingly unnecessary weight on retailers’ shoulders.
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