Retailers are bracing for a sharp increase in business rates as inflation data is released.
- Inflation dropped to 1.7%, below the Bank of England’s target for the first time in over three years.
- Despite this, food inflation rose to 1.9%, with business rates set to increase accordingly.
- The retail sector anticipates an additional £140 million in payments from this indexation.
- The British Retail Consortium is urgently calling for changes to address tax imbalances.
Retailers in the UK are facing an impending increase in business rates following the latest inflation figures. Inflation has fallen to 1.7%, which is notably below the Bank of England’s target of 2% for the first time in more than three years. However, this drop in general inflation conceals an uptick in food prices, which have risen to 1.9%. This rise is particularly concerning given its potential impact on making essential goods more expensive for consumers.
The Consumer Price Index (CPI) for September is crucial, as it will determine the increase in business rates set for next April. The retail sector is preparing for an estimated £140 million rise in rates as a result of this indexation.
According to Kris Hamer, Director of Insight at the British Retail Consortium, these escalating costs are detrimental, “damaging investment and preventing the creation of new shops and jobs.” Hamer underscores the risk of further financial strain if additional business taxes are introduced in the upcoming Budget.
While transport costs helped lower the overall inflation rate, this was offset by the rise in food prices, which increased by 1.7% month-on-month. In contrast, the inflation rates for alcohol and tobacco surged by 4.9%, and clothing and footwear inflation decreased from 1.6% to 0.8%.
Looking ahead, the headline inflation rate for October is expected to edge closer to 3% due to Ofgem’s adjustment of the energy price cap earlier this month. This increase could challenge real wage growth, posing a threat during what is traditionally the most profitable period for retailers.
In response to these pressures, the British Retail Consortium has advocates for the introduction of a ‘Retail Rates Corrector’, which would apply a 20% downward adjustment in business rates across all retail premises. Hamer articulates that such a measure is necessary to “redress the imbalance that sees retailers paying a higher proportion of their profits in taxes compared to almost any other industry.”
The retail sector faces a pivotal moment as inflation dynamics and fiscal policies shape the future landscape of business operations.
