The new Covid-19 variant makes things worse for retail when we hoped they might be better. The best hope for non-essential retail is a combination of furlough, meaningful grant levels and 100% business rates relief through to the end of the pandemic.
The chancellor has already acknowledged that business rates need radical reform in the long term. In March, we expect to see the conclusions of his Fundamental Review of Business Rates.
Supported by the public, Revo has been campaigning hard with its members to represent the views of the physical retail industry and persuade the Treasury that the survival of shopping places turns on a cut in business rates to lift this heavy burden from bricks-and-mortar retail.
The trouble is, the Treasury has always viewed business rates as a reliable source of revenue. By taxing a fixed asset, officials simply switched the Uniform Business Rate dial to a level that generates the required target revenue each year, irrespective of market conditions. As a result, the rate went up from 34p in 1990 to 51.24p today (small businesses 49.1p). But this is now proving counter-productive; high business rates are killing the goose that lays the golden egg.
The government is committed to stemming high-street decline with a range of grant funding, but while business rates remain a barrier to investment in the high street, how effective will these grants be?
More and more shoppers are turning to online retail, with online retail giants able to use their unfair tax advantage to strengthen their foothold: online accounts for 36% of retail sales but pays only 6% of all retail business rates, according to the Office for National Statistics.
A level playing field between bricks-and-mortar and online retail could be achieved through an online tax, a supplementary turnover tax or a charge on online deliveries. If the government is serious about boosting town centres, the chancellor must cut business rates and tax online retail effectively.
Shuttered shops are a blight on high streets and shopping centres. After an unrealistic three months’ respite, empty units become a real cost for their owners as empty rates kick in. Not only are they deprived of their income in a tortuously difficult market, but a business rates bill lands on the mat at 51p in the pound with sparse opportunity for reliefs.
This, on top of the seemingly inexorable rise of opportunistic CVAs and a year of moratoriums on rent enforcement, squeezes out the potential for private sector investment in town centres. At the least, the current business rates relief available to retailers should also be available to retail property owners left without occupiers.
With a vaccine rollout, we can hope for green shoots of recovery during 2021, but it is going to take time and patient capital for the economy to recuperate. The chancellor must recognise that the whole physical retail market will need to be nursed gently back to health; tax cuts, not handouts, are what is needed in the long run.
Vivienne King is chief executive of Revo and is leading a business rates campaign