New research by the BRC reveals a disproportionate tax burden on the retail sector.
- Retail contributes significantly more to business taxes compared to its GDP share.
- The tax burden impacts retail investments, shops closures, and high street vitality.
- Calls for a 20% Retail Rates Corrector to address the disparity and stimulate investment.
- Helen Dickinson emphasises the urgent need for government action to level the playing field.
New research conducted by the British Retail Consortium (BRC) has unveiled a significant disparity in the taxation of the retail sector compared to other industries. While contributing 7.4% of all business taxes, the retail sector only accounts for 5% of the economy’s overall GDP. This imbalance highlights a pressing issue that merits attention.
The financial impact on the retail sector is profound, with taxes representing 55% of its pre-tax profits, matching hospitality as one of the highest rates among major business sectors. Notably, business rates alone consume 11% of profits, the steepest rate incurred by any sector. The consequences of this heavy tax burden are starkly visible, manifesting in the closure of numerous shops and the decline of high streets across the United Kingdom.
Findings from a recent PwC study indicate a concerning trend, with 6,945 store closures recorded in 2024, equating to 38 closures per day. This marks an increase from the previous year’s rate of 36 closures per day. The Labour Party’s manifesto acknowledges the detrimental impact of the current business rates system, which acts as a deterrent to investment and exacerbates uncertainties for high street retailing.
An alarming statistic reveals that over the past five years, 6,000 shops have been lost, with business rates playing a significant role in these closures in two-thirds of cases. Without intervention, projections indicate that up to 17,300 shops may close over the next decade, further hindering investment in wages, skills development, and technological advancements crucial to boosting productivity and supporting economic growth.
The BRC has called on the government to introduce a 20% Retail Rates Corrector, a proposal aimed at alleviating the tax burden on retail properties. This measure, if adopted, could significantly aid in achieving the government’s manifesto commitment to reform the business rates system and revitalise high streets. Helen Dickinson, CEO of the BRC, stated: “Our research conclusively proves what retailers have known for years: the industry is paying far more than its fair share of tax.”
Dickinson argues that implementing the 20% Retail Rates Corrector would be a decisive step in levelling the economic playing field among sectors. By enabling retailers to invest more readily and swiftly, it could play a pivotal role in reigniting growth and transforming high streets throughout the nation. “The Chancellor has a golden opportunity to fix this and use the scale of the industry to help deliver some of the government’s priorities,” she asserted.
This research underscores the urgent need for tax reform to prevent further decline of the UK’s retail sector.
