Supermarket chiefs are on a collision course with independent retailers over their call for a 20% business rates cut.
Bosses of Tesco, Sainsbury’s, Asda, Morrisons, Aldi and Lidl were among 70 retail leaders who wrote to Chancellor Rachel Reeves last week calling for the discount to be included in her budget on 30 October.
However, the BRC, which orchestrated the letter, has not called for an extension of business rates relief, which is of particular benefit to smaller retailers.
The relief for retail, hospitality and leisure (RHL) currently amounts to a 75% discount, but with a £110,000 cash cap per businesses. The cap means it makes little impact on the rates bills of national chains while offering a dramatic saving for small businesses.
The RHL relief was extended for 12 months in last year’s autumn budget by then-Chancellor Jeremy Hunt, taking it until April 2025.
Rather than asking for it to be extended again, the BRC’s budget submission to Reeves suggests a way needs to be found to “lessen the impact” of it ending, while applying the new 20% discount with no cash cap.
British Independent Retailers Association CEO Andrew Goodacre said the BRC proposal “only benefits the largest retailers and would be really detrimental to a large majority of independent retailers”.
“We are members of the BRC and objected to this proposal, although it was approved as most members are the large retailers,” he told The Grocer.
Read more: Is a 20% business rates discount on the cards for high street chains?
Calculations from property consultancy Colliers suggest a retailer with a shop of a ratable value of £250,000 would see their business rates bill rise from £34,000 to £109,000 by replacing the capped 75% discount with the proposed 20% one.
Meanwhile, a retailer with shops of a rateable value of £2.5m would see their rates bill fall from £1.4m to £1.1m under the BRC’s proposal.
“We would have preferred a two-path approach from the BRC – a 20% discount for those businesses not receiving relief (the large chains), and retaining the RHL relief,” said Goodacre.
“This would have been our approach and it is disappointing that the BRC – the ‘voice of retail’ – has proposed a policy that does not reflect the needs of the whole sector.”
He added: “The smaller independents have benefited from a rates discount of at least 30% since 2019. Not paying full rates is part of their business model, and given the challenging trading conditions for the smaller retailers, any reduction in the current discount would be damaging to the independent retail sector.”
However, Colliers noted that the bigger retailers were the ones providing the most jobs, and that they had received limited business rates support to date.
It is also argued that the RHL relief was only intended as a temporary measure, while the BRC is proposing a longer-term solution to ease the excessive burden of business rates on the whole sector.
BRC CEO Helen Dickinson said: “Thriving shops of all sizes are essential to successful high streets to ensure breadth of choice, convenience and experience for customers.
“The biggest barrier to local investment by any retailer is the broken business rates system, which prevents the creation of new shops and jobs. The industry pays far more than its fair share – retail accounts for 5% of the economy, but pays 7.4% of all business taxes, and over 20% of all business rates, the highest of any business sector.
“All retailers need long term certainty to invest, and our proposed Retail Rates Corrector – a 20% downward adjustment in business rates paid on all retail properties – aims to fix the disproportionate burden on our high streets for good.
“The current RHL relief scheme is due to end in 2025, so government must avoid a business rates cliff edge that will harm jobs, investment and communities.”
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