The retail sector faces a significant tax burden according to the British Retail Consortium’s latest findings.
- Retailers contribute 7.4% of all business taxes, amounting to £33bn, which is higher than their economic contribution of 5% GDP.
- This burden equates to 55% of pre-tax profits, making it one of the highest taxed sectors alongside hospitality.
- Business rates represent a significant challenge, constituting 11% of profits and adversely affecting high street investments.
- The BRC proposes a 20% Retail Rates Corrector to alleviate these pressures and stimulate growth.
The British Retail Consortium (BRC) has released new research indicating that the retail sector is disproportionately taxed compared to other industries. Retailers are responsible for 7.4% of all business taxes, which totals £33bn, yet their contribution to the economy is measured at just 5% of GDP. This discrepancy highlights a significant financial strain on the sector.
Currently, the tax burden on the retail industry accounts for 55% of their pre-tax profits. This level of taxation places retailers alongside the hospitality sector as one of the most heavily taxed industries. Particularly, business rates alone make up 11% of profits, presenting a steep challenge for the sector.
The consequences of this taxation are evident, with many shops closing and high streets declining across the country. In 2024, fresh data by PwC shows that 6,945 retail outlets have shuttered, averaging 38 closures each day, a rise from 36 per day last year. Labour party’s election manifesto has recognised this issue, stating that the existing business rates system discourages investment, generates uncertainty, and imposes an excessive burden on high streets.
The impact of business rates is stark, with two-thirds of the 6,000 shop closures over the past five years attributing the rates as a decisive factor. There is a possibility of up to 17,300 additional shop closures over the next decade if changes are not implemented. Beyond closures, these rates hinder investment in workforce pay, skill development, and the technological advancements necessary for productivity improvements, decarbonisation efforts, and overall economic growth.
In response, the BRC has submitted its proposition to the Autumn Budget, advocating for the introduction of a 20% Retail Rates Corrector. This measure aims to adjust the rates for retail properties, thus fulfilling the government’s manifesto promise to reform business rates and rejuvenate Britain’s high streets. The proposed correction is seen as a strategic move to level the economic playing field and enable retailers to further invest in initiatives that are crucial for enhancing growth and revitalising high streets across the nation.
The proposal for a Retail Rates Corrector offers a promising path to address the inequities in current taxation and support high street revitalisation.
