On budget day this week Alex Baldock, CEO of Shop Direct, gave a super presentation at Retail Week Live on the beauty of operating as a pure play retailer unencumbered by the hassle of operating high street shops.
He did not refer to business rates specifically but there is no doubt that they are proving to be one of the bigger hassles of running physical stores for many retailers. The impending rates revaluation next month – the first in seven years – will see significant increases in the levels of rates being demanded from many retailers. For stores in some city centres the increase will be as high as 50%.
There had been some hope that the budget would potentially offer some relief from the pain ahead because those retailers operating large numbers of stores – in areas of expensive rentals – have a fair argument that they are taking an unfair hit while their online only rivals whose only properties are sheds in cheaper locations are getting off extremely lightly. In some case their business rates will be reducing in April.
Although the Chancellor Philip Hammond acknowledged in his budget speech that “we have to find a better way of taxing the digital part of the economy…the part that does not use bricks and mortar” he seems to have kicked the proverbial can down the road.
A very modest £435 million is being committed to help soften the blow to those hardest hit, which involves councils being given powers to distribute £300 million worth of discretionary relief to businesses and 90 per cent of pubs will get a £1,000 discount on their business rates bills. There has also been a pledge that no company losing small business rate relief will see their bill increase by more than £50 a month next year.
This went down rather badly with Helen Dickinson, CEO of the BRC, who suggested it was “yet another sticking plaster on a chronically ill patient”. She continues to call for a radical overhaul of the taxation of business in the UK.
While it is great that digital businesses are able to grow free of relative constraints from tax and business rates it is sad that the high street continues to be put in a perilous state by stores-based retailers being taxed out of existence.
The digital side of things also benefited in the budget from the £270 million commitment Hammond made to investing in technology such as robotics and driverless vehicles to “keep the UK at the forefront of disruptive technologies”. There is also a further £200 million being set aside for local projects to leverage private sector investment in full-fibre broadband networks and £16 million for a new 5G mobile technology hub.
It is interesting and very positive to see the investment being made in these technological areas that undoubtedly benefit multi-channel retailers but then the business rates regime is causing them headaches with their physical store estates.
Unlike Baldock, who is happy to be store-free, for the many others who are taking a more multi-channel approach there must be at least a small amount of envy being cast in the direction of the Shop Direct boss.