Retailers have warned that the chancellor’s decision to dodge a full review of business rates will result in an “unnecessary loss” of jobs and shops – saying the temporary 50% cut for small businesses announced in the budget is not enough to help the high street.
They said the cut, which is capped at £110,000 per business and will last a year, would only benefit small retailers, bars and restaurants and pubs, because larger shops such as a single department store can pay more than £1m a year in rates.
The cancellation of next year’s planned rise in business rates – which would have added just over £1bn to bills, according to analysts at the real estate adviser Altus, and of which a quarter would have been paid by retailers – was welcomed but not seen as a long-term fix.
There was also disappointment that the budget documents said the government would only “explore the arguments for and against” an online sales tax that could fund a reduction in business rates for high street retailers. The latest delay came despite a promise from the government for the resolution of a fundamental review of the business rates system in the autumn budget.
A pledge to exempt investment in green innovations such as solar panels or heat pumps from business rates and a one-year relief on higher bills linked to building improvements, announced by the chancellor, Rishi Sunak, on Wednesday, was welcomed but not seen as a major change.
Helen Dickinson, the chief executive of the British Retail Consortium, which represents most large retailers, said: “With no reduction in the [rates] burden, this will lead to the unnecessary loss of shops and jobs and fails to incentivise investment in all parts of the country. This is bad news for every member of the public who wants a vibrant high street in their local community, with retail at its heart.”
Vivienne King, the chair of the Shopkeepers’ Campaign, said Sunak had “betrayed the high street” by failing to permanently reduce the business rates burden with a fundamental review of the property tax system, which is seen to unfairly target retailers and hospitality businesses.
“The pledge on more frequent revaluations is simply a re-announcement of what [the then chancellor] Philip Hammond promised in 2017. We are deeply disappointed that there is no commitment to annual revaluations so that tax bills reflect the market property values,” she said.
King’s comments were backed by retailers including Gary Grant, the founder of The Entertainer toyshop chain, who said the short-term discounts did not change the fact that the business rates system was “completely broken and not fit for purpose”. He said online specialists currently benefited from a “massive rates advantage”.
Steep business rates have been partly blamed for mass closures on British high streets, where store owners are hobbled by paying higher taxes than online specialists such as Amazon, Boohoo and Asos.
Labour last month pledged to scrap business rates and undertake the “biggest overhaul of business taxation in a generation” if it was voted in at the next election.
Business groups more broadly welcomed some of the measures announced in the budget but blasted the government’s lack of a cohesive economic plan to allow companies to grow and overcome staffing and supply chain challenges.
Firms are being buffeted by various headwinds, including soaring energy and raw material costs, supply chain disruption and shortages of workers such as HGV drivers. They are also preparing for impending tax rises.
Industry lobby groups accused Sunak of unveiling “piecemeal” initiatives that would not give many businesses confidence to invest.
The budget “takes several positive steps forward, but isn’t bold enough to deliver the high investment, high-productivity economy the government seeks”, said Tony Danker, the director general of the Confederation of British Industry.
Others warned that companies may require more support if current challenges persist.
Shevaun Haviland, the director general of the British Chambers of Commerce, said: “Businesses have been battered by 18 months of the pandemic and problems around supply chain costs and disruption, labour shortages, price rises, soaring energy bills and taxes, and there may still be difficult months ahead.”