While there is speculation the Chancellor’s Budget will include tax breaks to help struggling retailers, commentators claim his plans are unlikely to stem the current bloodbath on the UK’s high streets, where major stores are closing and job losses mounting, with a potential 50,000 roles at risk
The Chancellor’s package is said to include £900m in business rates relief for nearly 500,000 small businesses and a pot of nearly £650m to rejuvenate high streets and their transport links. It claims that the new business rates relief, targeted at small retailers could knock a third off their bills.
John Webber, head of business rates at Colliers International, describes the move as ‘wide of the mark.’
Webber points to research that shows that plans announced this week to close 50 Debenhams shops coupled with Gourmet Burger Kitchen’s plans to axe 17 restaurants brings the total amount of UK retail space lost in 2018 to 20.3m sq ft , across 1500 stores and affecting 38,000 jobs, the worst figures for a decade.
However the Chancellor’s measures aim to help those businesses with a rateable value (RV) of up to £51,000, and give no concessions to those that have an RV that is higher, which are typically the bigger stores that are currently in trouble.
Webber said: ‘It beggars belief that whilst businesses are set to face a £600m business rates bill rise in 2019, £200m of which will be paid by the retail sector, the Chancellor thinks it is enough to purely offer a giveaway to businesses who in most cases already receive small business relief and to do nothing to help the big retail employers.’
Colliers research suggests 2018 has seen the highest number of store closures since Woolworths failed in 2018. Toys R Us, Maplin, House of Fraser and Homebase, for example, have either gone into company voluntary arrangements (CVAs) or are set to close stores putting thousands of jobs at risk.
Colliers has been following those sizeable retailers or restaurant chains (with more than 10 stores) that have announced CVAs since the 2017 Business Rates Revaluation and believes the number is now in the mid-30s. This does not include Marks and Spencer or Debenhams who are not in CVA but have announced they are struggling and will need to close stores and make redundancies. Last week Debenhams announced it would be closing 50, or a third of its stores, putting another 4000 jobs at risk.
It claims that none of the stores on its list of CVAs would have benefited from what the Chancellor is proposing. Colliers says its research suggests bigger retailers have been particularly hard hit by property costs and business rate rises.
Webber said: ‘At the very least we hoped he would freeze any business rates increases next year- not the unsustainable 49% for top rises currently planned. And it was rumoured he would remove downward phasing, enabling rate payers to pay their true rates liability now and not wait four years to do so.
‘We believe addressing this issue could have a major impact on several decisions to either close or keep open stores in a number of regional high streets. And of course, all this impacts on jobs. Observers claim over 50,000 jobs are at risk.
‘What we need to see is proper business rates reform, a proper look at reliefs and rating deserts, a fairer system of how the tax take is funded across all sectors and a rebasing of the multiplier so that rates bills are not an effective 50% tax.’
Separately, research from UHY Hacker Young shows the total pre-tax profits at the UK’s Top 100 restaurants have plunged 80% in the last year to just £37m, down from £194m twelve months ago.
UHY Hacker Young says that the cost of closing struggling sites has weighed heavily on the profits of restaurant groups over the past two years. Household-name groups including Gaucho, Strada, and Prezzo have all shut a number of outlets in recent months as the casual dining sector deals with overcapacity.
Gourmet Burger Kitchen posted a £2.6m operating loss for the first six months of 2018, Harry Ramsden’s, the fish and chip shop chain, has reported a £5m loss following its exit from six sites owned by the company and a further three franchise locations, while Jamie’s Italian saw sales plummet 11% in 2017 to £101m.
Peter Kubik, partner at UHY Hacker Young, said: ‘The downward spiral in profits of restaurant groups reflects the severe difficulties that continue to impact the sector.
‘Despite the long-term benefits, closing down restaurants is often hugely expensive in the short-term. For some struggling restaurant groups that means things will get worse before they get better.’
Report by Pat Sweet
