Government Urged to Reform Business Rates as 17000 Shops Face Closure Risk

The chief executive of Sainsbury’s, Simon Roberts, and the general secretary of the Union of Shop, Distributive and Allied Workers (Usdaw), Paddy Lillis, have issued a stark warning to the Labour government. They assert that unless the business rates regime is overhauled, more than 17,000 shops could face closure over the next decade, putting tens of thousands of retail jobs at risk.

In an article for The Times, Roberts and Lillis emphasise that the “outmoded business rates system” is the primary obstacle to growth in the retail industry. They point out that despite promises of reform from successive governments, only minor changes have been made, resulting in shop closures, job losses, and stunted economic growth.

Research conducted by Development Economics and shared with The Times suggests that a 20% reduction in headline business rates would save retailers £1 billion in the first year and safeguard or create over 17,000 jobs. While such a cut would initially reduce tax revenues for the Treasury, the research indicates that after ten years, the corresponding increase in economic activity would generate net positive returns of £70 million per year for the government.

The consequences of inaction could be severe. Development Economics warns that without government intervention on the rates regime, 17,300 stores could close by 2033-34 in a worst-case scenario, equating to an average of 15 failures per town in England and the potential loss of around 42,000 jobs. Roberts and Lillis argue that reforming business rates would be an excellent starting point for a government seeking to revitalise growth, boost jobs, and secure long-term funding for public services.

They emphasise that retailers have contributed about a fifth of business rates tax revenues, despite making up only 5% of the economy. The Labour Party’s general election manifesto promised to overhaul the business rates system to create a more level playing field between digital and bricks-and-mortar retailers. However, Chancellor Rachel Reeves faces a challenging set of public finances, with unprotected departments facing significant budget cuts and government overspending.

The Treasury has stated its commitment to replacing business rates with a fairer system that will level the playing field, better incentivise investment, tackle empty properties, and support entrepreneurship. As the October 30 budget approaches, the retail industry eagerly awaits the government’s response to this pressing issue.