Re­turn of busi­ness rates will bring car­nage to high street

If min­is­ters make the right choices, this cri­sis could be the cat­a­lyst for a wave of new re­tail en­trepreneur­s

The Daily Telegraph - Business - - Business Comment - JU­LIAN DUNKERTON Ju­lian Dunkerton is chief ex­ec­u­tive of Su­perdry

One of the most im­por­tant mea­sures that has helped re­tail­ers sur­vive the im­pact of Covid-19 has been the sus­pen­sion of busi­ness rates. It has en­abled us to get through a pe­riod when all our stores were forced to close, and the sub­se­quent pe­riod when foot­fall has been sub­dued and will in­evitably con­tinue to be so.

As it stands though, busi­ness rates will re­turn to nor­mal next year. Even worse, the Gov­ern­ment has an­nounced that the next rates reval­u­a­tion will be de­layed from 2021 to 2023. What this means is that when rates come back, they’ll still be based on shop rents from 2015, which bear no re­la­tion to to­day’s much re­duced lev­els. The sit­u­a­tion could be com­pounded if Tues­day’s re­port in

The Daily Tele­graph that the Gov­ern­ment is con­sid­er­ing a higher busi­ness rate for larger shops be­comes a re­al­ity.

I be­lieve this will be a dis­as­ter for the UK’s high streets. This isn’t just an is­sue for re­tail­ers – healthy town cen­tres are es­sen­tial for the well­be­ing of our com­mu­ni­ties. Every­one can see what is hap­pen­ing to­day with stores clos­ing all over the coun­try, and if the Gov­ern­ment doesn’t take ac­tion now, it will be too late.

I’m not the first chief ex­ec­u­tive of a big re­tailer to high­light the threat the cur­rent busi­ness rates sys­tem poses to bricks and mor­tar re­tail. In a post-Covid world that risk is mul­ti­plied. But what has not been high­lighted is the dam­age it will do to the next gen­er­a­tion of re­tail en­trepreneur­s. I have some ex­pe­ri­ence in this re­gard. Su­perdry may be a global brand to­day but I spent the first 15 years of my ca­reer as an in­de­pen­dent re­tailer.

In­de­pen­dent re­tail could play a re­ally im­por­tant role in the eco­nomic re­cov­ery af­ter Covid, with peo­ple who have been made re­dun­dant be­com­ing the next gen­er­a­tion of re­tail en­trepreneur­s, fill­ing gaps left on the high street as tired brands ei­ther move on­line only or close al­to­gether. But that won’t hap­pen with­out re­form of busi­ness rates.

Of course it’s right that re­tail­ers pay their share to­wards lo­cal ser­vices, and no one’s ar­gu­ing with that. But there is a huge im­bal­ance be­tween what phys­i­cal re­tail­ers pay and the min­i­mal rates paid by the on­line gi­ants on their ware­houses. That might have made sense in 2015 when re­tail rents were at their peak and ware­houses hadn’t be­come the epicentres of on­line re­tail they are to­day. But it doesn’t make sense any more.

There needs to be a lev­el­ling of the play­ing field be­tween stores and on­line, which as well as re­form of rates should also in­clude a tax on on­line turnover to en­sure the pure-play e-com­merce gi­ants are pay­ing their share.

The irony is that, to their credit, many land­lords are ac­cept­ing the new re­al­ity, ad­just­ing rents down­wards and agree­ing to new mod­els like turnover rents. But they too are vic­tims of the busi­ness rates sys­tem. They are see­ing the value of some stores re­duced to noth­ing, or even be­com­ing neg­a­tive, as the rates alone make oc­cu­py­ing them pro­hib­i­tive for any re­tailer, and then fall to the land­lord.

It doesn’t have to be like this. When I travel to our in­ter­na­tional stores, I see them sur­rounded by flour­ish­ing in­de­pen­dent re­tail­ers. That’s be­cause un­like the UK, coun­tries like Italy and

France have a sen­si­ble sys­tem of tax­a­tion on re­tail prop­erty that en­cour­ages en­trepreneur­s.

I am still a be­liever in the fu­ture of stores. My view is that if you cre­ate at­trac­tive des­ti­na­tions filled with great prod­ucts, then cus­tomers will come. I’m pleased that we are see­ing early ev­i­dence of this at Su­perdry as the lock­down grad­u­ally lifts.

But there’s no get­ting away from the re­al­ity that re­tail is chang­ing. On­line is where the growth is and for brands like ours, a com­pelling on­line propo­si­tion is as im­por­tant a shop win­dow as our flag­ship stores. All re­tail­ers have seen dra­matic e-com­merce growth dur­ing lock­down and the re­al­ity is that not all those sales are go­ing back to stores.

If rates re­turn next year at their pre­vi­ous level, it will un­leash a whole new wave of car­nage on the high street. All re­tail­ers will need to look again at their store estates, and those stores that are mar­ginal will not re­open. For those in­de­pen­dent re­tail en­trepreneur­s with one or two stores, the re­turn of rates could rep­re­sent a killer blow. Not just to their stores, but also to the high streets where they cre­ate the vi­brant and di­verse re­tail scene our strug­gling towns and cities so des­per­ately need.

The re­al­ity is that for the high street to be sus­tain­able, rates need to be half where they were be­fore the pan­demic, which would re­flect what has hap­pened to high street rents. The Gov­ern­ment can’t keep putting it off – we need ac­tion on rates now.

We are at a cross­roads, and the fu­ture of our town cen­tres and high streets is in the Gov­ern­ment’s hands. I des­per­ately hope it makes the right de­ci­sion. If it does, this cri­sis could be the cat­a­lyst for a wave of new re­tail en­trepreneur­s who would breathe life back into our high streets. If it fails to act, our high streets face a fu­ture of de­cay and de­pres­sion, which will be im­pos­si­ble to re­verse.

‘The re­al­ity is that for the high street to be sus­tain­able, rates need to be half where they were be­fore the pan­demic’

Small shop: for in­de­pen­dent re­tail­ers, the re­turn of rates could be a killer blow

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