- Retailers face an increase in business rates in April
- Barrage of other costs imposed by Chancellor will also kick in
- This includes increase in NI paid by employers and rises in minimum wage
Britain’s biggest supermarkets have ramped up pressure on Rachel Reeves to overhaul the ‘punitive’ business rates regime.
Retailers are facing soaring costs in the wake of the Chancellor’s Budget in October.
And now, the bosses of Tesco and Sainsbury’s said looming increases to the levy – which is based on the value of a property and therefore hits bricks-and-mortar stores harder than online operators – could make large sites unviable.
Retailers, from independent shopkeepers to nationwide chains, face an increase in business rates in April alongside a barrage of other costs imposed by Reeves.
This includes the increase in National Insurance paid by employers and inflation-busting rises in the minimum wage.
In total, retailers are facing a £7billion rise in costs, and are calling on Reeves to ease the burden by reforming business rates.
Under pressure: Retailers are facing soaring costs in the wake of the Chancellor’s Budget in October
Announcing a bumper set of Christmas trading figures, Sainsbury’s chief executive Simon Roberts described the levy as a ‘fundamentally difficult and unfair tax on retail’.
He said it will have to ‘look very carefully’ at future hiring decisions given the increased costs the business is facing.
‘The size and scale of costs coming at the industry is a real concern,’ said Roberts. ‘We’re going to do everything we can to mitigate the impact, but there’s no doubt that there’s a lot of inflation building in the system.’
Ken Murphy, his counterpart at Tesco, warned ‘onerous’ rates bills were putting ‘the integrity’ of the High Street at risk – particularly in the poorest areas.
The issue has been highlighted by the Mail’s Save Our High Streets campaign. Reporting a 6.8 per cent rise in sales at Sainsbury’s for the six weeks to January 4, Roberts sounded the alarm over the Chancellor’s plan to whack up the business rates charged on larger sites so smaller shops pay less. The idea is to snare big warehouses used by the likes of online giant Amazon.
But it is feared the move will backfire as it will also hit large stores. Roberts said: ‘There are big parts of the UK where the supermarket plays a fundamental role at the heart of a community, and we need to make sure that the reform of business rates makes the ongoing viability of those locations really clear.
‘This is a fundamentally unfair tax, which all retailers would expect and ask the Government to look at urgently and across the sector to make sure that we don’t see the continued burden that this brings.’
Murphy said big grocers and department stores, from Tesco and Morrisons to Marks & Spencer and John Lewis, are ‘anchor tenants’ that attract shoppers to the High Street.
‘Those anchor tenants are often critical to maintaining the integrity of that High Street,’ he said. ‘The risk is that more and more of those large retail sites become unviable.’
This is a particular concern for the poorest areas with a struggling High Street, he said.
Sainsbury’s celebrated its ‘biggest ever Christmas’ as party food and bottles of fizz flew off the shelves.
The supermarket will increase staff pay by an inflation-busting 5 per cent this year, which will see the minimum annual pay for a full-time worker outside London increase from £22,882 to £24,026 by August.
Bleak figures recently showed more than 13,000 shops closed for good in 2024 – an increase of 28 per cent on the year before.
Industry experts at the Centre for Retail Research (CRR) warn this will get even worse in 2025, with around 17,350 shops are predicted to shut down.
This would be the highest figure since the CRR started compiling its records in 2015.
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