LONDON: Business rate changes that push up costs for retailers with city-centre properties and at the same time reduce costs for online competitors’ out-of-town warehouses are adding to the woes of the British high street.
Rates adviser Altus Group has found that average rates bills for department stores in England and Wales have risen 26.6% for the 2018-19 billing period, and large high street shops’ rates are up 10.8%.
But the shift in valuations last year that has led to such big increases this year has also led to lower rates for online retailers, whose growth is a source of significant pain to chains with a physical retail presence.
Altus data shows that because online retailers tend to have their distribution centres in more remote or less prime areas, their rates have gone down, the Financial Times reported; Altus says online fashion retailer Asos and general merchandise vendor Shop Direct are both paying less in rates than a year ago, and Amazon’s rates bill is just 0.7% higher this year.
The revelation comes at a critical time for UK retailing. An estimated 50,000 retail jobs have been axed in the first half of 2018 due to store closures. Maplin, Toys ‘R’ Us and Poundworld have gone into administration this year, while House of Fraser, Marks & Spencer, Carpetright and Waitrose have all announced significant numbers of branches will close their doors.
Rates are far from the only point of pressure on physical retailers. Changing consumer habits are a big factor, and national data on retail sales for last year shows the value of online sales growing by over 12%, compared to total retail sales growth of just 1.4%.
Since April this year, retailers have faced bigger bills for staff as a result of increases in the national minimum wage and the National Living Wage, which applies to workers aged 25 or over.
“Business rates are rarely the sole driver for insolvencies but (are) certainly a contributory factor, with bills having risen by more than a fifth through inflation during the seven years before last year's revaluation,” said Robert Hayton, head of UK business rates at Altus Group.
“Add that to the lethal cocktail of other increased operating costs for the national living wage and apprenticeship levy and it creates the perfect storm.”
Altus uses government databases to estimate rates bills for shops and distribution centres.
Sourced from Financial Times; additional content by WARC staff