John Orchard 07 November 2019

Retail, High Streets and Business Rates

Retail, High Streets and Business Rates image

Barely a day goes by without some tale of woe emerging about the state of the British High Street. These stories are usually accompanied by a call for a radical change in one or other government policies – policies that may be real or, as is often the case, entirely imaginary.

The High Street debate is a most puzzling affair, not least because the reported issues are often nothing to do with the town centres of our traditional market towns – which is what the debate started as. Instead the term ‘High Street’ has been hijacked by large corporate retailers, and the media and other commentators, as some sort of shorthand for those very businesses, whether or not they are actually present in our high streets any more. There is not room here to develop that argument, but it needs to be kept in mind for what follows next.

‘Doom and gloom’ seems to sell newspapers and advertising on websites. When it comes to retailers this reported hopelessness offers opportunities for their management to pass the blame for their poorly performing businesses wholly onto external factors. The blame, of course, is not theirs but is rather…(here were can supply a list of blameworthy ‘causes’ for their malaise, which include high rents, business rates, the Internet, Brexit, rainy weather, sunny weather, snowy weather and so on).

When the more pertinent debate about the actual High Street was first brought into the public realm in the early part of the last decade, the idea that business rates was a factor was hardly mentioned. Since then though this tax has been elevated to superstar status as one of the real bête noire of both British retailing and, by extension, the High Street. The fact that today it is regularly cited as a prime cause for the failure of retail businesses is itself a reason to be worried. The hyperbole emanating from senior managers whose inability to recognise a changing economic landscape is, at times, truly astonishing. Brexit, another ‘cause,’ is probably at the moment slightly ahead of the rates in the blame deflection game, so it is time to take a more evidence-based approach.

Let us take the Office for National Statistics monthly retail sales report for September 2019. The downturn is in fact an upturn, and the general trend has been upwards since 2016. In fact, the year-on-year growth for nearly all product groups is 3.1%. Ironically, the Internet’s share decreased. This month has also seen a plea by Alex Probyn, UK president of Altus Group, for the chancellor to prevent the annual inflation linked rise in business rates. He cites that in the past decade the revenue take from business rates on retail businesses has increased by £6.04bn. I think that he is probably right with that figure, but wrong about the reasons.

The problem is that the inflationary increase such as we will have this year is not a serious contributor to the problem. His assertions, or at least how they have been reported by LocalGov.co.uk, show a serious ignorance of the issues. It may be that he has been misquoted, but then I will expect to see his rebuttal published shortly. The 2013 Act which allowed the revaluations to be delayed for two years without a concomitant alteration to the Universal Business Rate, known as the multiplier, was one cause of the more serious upshifts in the revenue take – which the cynic in me believes is what the then government intended.

There are winners and losers, some are high-profile and others are not. Some are bricks and mortar retailers, but some losers currently are actually pure play Internet traders – Asos, for example. The time has come to ignore the hyperbole. To listen carefully to all sides of the arguments, but not give special credence to those who happen to be louder or more persistent. These issues DO affect our town centres, but very often NOT in the way that the pundits and many retailers would have us believe.

John Orchard is a member of the Institute of Economic Development and managing director of Welbeck Retail Management

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