Business rates put 17,000 shops at risk of closing, Labour warned

More than 17,000 shops are at risk of closure over the next decade unless the Labour government overhauls the business rates regime, the boss of Sainsbury’s and the general secretary of the biggest retail union have warned.

In an article for The Times, Simon Roberts, the chief executive of Sainsbury’s, and Paddy Lillis, the general secretary of the Union of Shop, Distributive and Allied Workers, say that tens of thousands of retail jobs could disappear because of a sharp rise in business rates bills.

“The No 1 barrier to growth in our industry is the outmoded business rates system,” they say, adding that “successive governments have promised reform but have only ever tinkered around the edges. The result? Shops closing, jobs lost, economic growth stunted.”

• Simon Roberts and Paddy Lillis: ‘Cut business rates to save jobs and boost growth’

Research shared with The Times carried out by Development Economics has claimed that a 20 per cent reduction in headline business rates would save retailers £1 billion in the first year and would safeguard or create more than 17,000 jobs.

Although Development Economics says that a headline rate cut of such a magnitude would initially reduce tax revenues for the Treasury, its research has found that, after ten years, the corresponding increase in economic activity would generate net positive returns of £70 million per year for the government.

Without action from the government on the rates regime, 17,300 stores could close by 2033-34 in a worst-case scenario, amounting to, on average, 15 failures per town in England, Development Economics has found. About 42,000 jobs could be lost.

Roberts and Lillis say: “A government that revitalises growth, boosts jobs and secures long-term funding for public services will be able to look back on its achievements with pride. Reforming business rates won’t be a silver bullet to achieving all of this, but it would be a very good place to start.”

Business rates are a tax charged on commercial properties, such as shops, pubs and offices. The bill a company has to pay is based on a multiplier applied to the rateable value of their property. This multiplier rate was frozen between 2020-21 and 2023-24 at 51.2p for most businesses, but now it has risen to 54.6p.

According to the Office for Budget Responsibility, the government is set to collect £32.1 billion in business rates revenues this year, rising to £37.4 billion in 2028-29. Roberts and Lillis say that retailers have contributed about a fifth of these tax revenues, despite making up 5 per cent of the economy.

In its general election manifesto, the Labour Party promised to overhaul the business rates system to create a more level playing field between digital and bricks-and-mortar retailers. Digital retailers often have lower business rate bills owing to their minimal property footprint.

Rachel Reeves, the chancellor, is grappling with a tight set of public finances, with unprotected departments facing about £20 billion in real terms budget cuts and £21.9 billion in government overspending. She is expected to raise taxes in her first budget on October 30.

The Treasury said: “As committed to in the manifesto, we pledged to replace business rates with a fairer system. This new system will level the playing field between the high street and online giants, better incentivise investment, tackle empty properties and support entrepreneurship.”