Written by Alex Baldock, CEO, Currys plc
First published on February 2, 2021 in Retail Week
We’re now only weeks away from the end of the government’s business rates holiday. I’m sure many of us are grateful for a decisive and vital measure that, for some retailers, has made the difference between surviving the pandemic and not.
Nevertheless, we now need clarity on what lies beyond. Retail matters to the UK: 3 million jobs and £17bn of tax are at stake.
We’re the UK’s biggest private-sector employer and can be a powerful engine of the post-crisis recovery. But it’s not sustainable for retail to be 5% of the economy while shouldering 10% of all business taxation. We’re not looking for handouts – just fair treatment.
Of course, we can’t be blind to the government’s daunting and urgent challenge to get post-crisis public finances to add up. So whatever fairer taxation we propose must be affordable and easy to implement.
Some demand an online sales tax to make Amazon pay their way. Not me. Retail’s already over-taxed and, given the history of new taxes, who can doubt that in time it would increase our total burden?
In any event, what is an online sale? Dixons Carphone is not unique in that, while twice as many of our customers now prefer to shop online-only compared with before the pandemic, 60% of them still want to shop both online and in store.
We believe the future of shopping is a blend between the physical and the digital, so an ‘online sale’ will be ever-harder to pin down and the tax harder to collect.
Is buying in store from the online range an online sale? Is ordering online and collecting in store? How about video shopping online, assisted by a store colleague?
Property is easier to pin down, which is one reason the government likes business rates. So what to do about them?
Retailers have long been hit hardest by business rates – we pay fully a quarter of them. And today’s business rates are based on 2015 rental values but, as all retailers know, rents have fallen precipitously since then. Rates haven’t.
Like many retailers, we at Dixons Carphone have managed to secure big cuts in our rents when reviews have fallen due, with landlords acknowledging the much-changed retail environment.
But this has also shone a light on the inadequacy of the rates system. The glacial speed with which rates reflect changed rents mean that rates now make up a much greater proportion of the costs of operating a shop.
Over the past decade, all the growth in retail has come online and, as a consequence, the only part of the commercial property market where rents are growing – and they are growing dramatically – is distribution warehouses. Yet rates bills for sheds are proportionately a fraction of those for stores.
We need much faster resettlement of rates to reflect changing rental values. This would be fairer, rebalancing the bill away from the struggling high street towards those better able to pay.
It could be done quickly as it would use the existing rates system. All it needs is for the government to move faster, which it has shown it can do during this crisis. If necessary, we could use a form of self-assessment, at least initially.
It would largely be self-funding: the bill would go down for stores, but up for sheds. It wouldn’t just benefit retailers, but also hard-pressed pubs, restaurants and landlords.
Omnichannel retailers like us would pay more on our warehouses, as is fair. And yes – sorry, Jeff – Amazon would have to start paying its fair share of tax, rather than getting a free ride on the infrastructure other retailers are funding today.
Government can do something bigger than just extending the rates holiday, welcome though that would be. Bold reform is in reach that would preserve many tens of thousands of otherwise viable jobs and the character of many high streets.
A rates resettlement would affordably and rapidly ease the burden on retail, redistribute it more fairly among retailers, help other sectors to boot, and light a fire under the recovery. I urge them to seize this opportunity.