Sainsbury’s and union bosses have called on the new Government to reform business rates.
This appeal from the supermarket giant and the Union of Shop, Distributive and Allied Workers (USDAW) comes after research highlighted how inaction could lead to the closure of 17,300 retailers over the next decade. Representing 148,000 Sainsbury’s employees and 360,000 USDAW members, the organisations want a new system supporting rather than stifling the retail sector.
The Impact of Current Business Rates
Research conducted by Development Economics has raised serious concerns about the Government’s decision to lift the freeze on the ‘multiplier,’ the rate used to calculate business rates. In the first year alone, this change is projected to cost businesses an additional £1.6 billion. More than a quarter of this burden is set to fall on the already struggling retail sector. The increase is expected to have a ripple effect, leading to significant job losses and financial strain on the industry.
Potential Job Losses and Economic Fallout
The report forecasts the immediate impact could be the loss of 4,300 retail jobs in the 2024/25 fiscal year. Sainsbury’s says beyond job losses, taxpayers are also likely to suffer if the Government continues with its current strategy of annual inflationary increases.
The research says by making profitable retail stores unsustainable, these increases could result in approximately 17,300 closures by 2033/34. The study estimates this would cost the taxpayer nearly £5.5 billion in lost tax revenue over the next decade. These are funds that could otherwise be invested in critical public services like education and healthcare.
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A Proposed Solution for Retail Survival
The report gives some hope. It suggests a 20 percent reduction in business rates could both save jobs and boost the economy.
Development Economics estimates the proposed cut would generate an additional £70 million in business rates revenue annually within a decade, as more stores would remain open and businesses would be more inclined to invest.
Positive Economic and Employment Outcomes
The report says a 20 percent reduction in business rates would also have significant positive outcomes for employment. It indicates this cut could protect and create over 17,000 retail jobs that might otherwise be at risk.
The research also says the move would benefit the UK’s struggling high streets. This is by preserving the presence of major retailers, which are crucial to supporting other local businesses.
The proposed reform could enhance the Gross Value Added (GVA) of the retail sector by £400 million per year.
Industry Leaders Voice Their Support
Simon Roberts, Chief Executive of Sainsbury’s, said:
“All responsible retailers want to pay their fair share of tax, but the current business rates system has become an enormous burden on our industry. It is no longer fit for purpose. It has failed to keep pace with major changes in how customers are now shopping and how much our retail industry has changed over the last decade. As a result, it is directly causing store closures and job losses across the sector.”
“We believe there is a better way—one that will contribute to higher economic growth and help our communities to thrive. Today’s report shows that reducing business rates would enable businesses to invest in more stores, creating jobs and generating prosperity. We welcome the new Government’s manifesto commitment to reform business rates and hope that it will move quickly to deliver on this promise, which would deliver real benefits for communities, employees, and businesses alike.”
USDAW’s Perspective on the Retail Crisis
Paddy Lillis, General Secretary of USDAW, echoed Roberts’ concerns, said:
“The scale of the challenge the retail industry faces is huge, with very high numbers of job losses and store closures that are scarring our high streets and communities.”
“A robust plan is needed for the future of retail work that addresses both the immediate and urgent priorities facing the industry and staff, as well as wider measures to help deliver better jobs. We need a coordinated and inclusive approach, involving all key stakeholders.”
He also criticized the current business rates system for disadvantaging physical stores compared to online retailers, describing it as an “unfair tax on shops.”
He added:
“We strongly welcome the manifesto commitment from the Labour Government to take action on this issue. We are keen to work with Government and business to ensure that business rates are replaced with a fairer system, which allows our high streets, towns, and cities to thrive.”
The full report can be found here.
