Government warned that 17,300 shops face closure without business rates reform

The government must deliver on its promise to reform business rates or risk 17,300 store closures over the next 10 years, Sainsbury's and retail trade union USDAW has warned.

In its general election manifesto, the Labour Party pledged to replace business rates with a system to "level the playing field between the high street and online giants, better incentivise investment, tackle empty properties and support entrepreneurship".

Large retail chain Sainsbury's and USDAW called on the government to act on this pledge and pointed to new research by Development Economics which raised concerns around the previous government's decision to remove the freeze on the 'multiplier', the rate in the pound at which business rates are charged.

It said the increase will cost businesses £1.6bn in the first year, and lead to 4,300 retail jobs being lost in 2024/25.

Continued annual inflationary increases to business rates would cause around 17,300 shop closures by 2033/34, the report warned, and cost the taxpayer almost £5.5bn in lost tax revenue.

According to the study, one solution is a 20% headline cut to retail business rates which it claimed would actually generate more net revenue for the taxpayer because more stores would thrive and businesses would invest more as a result.

Development Economics estimated that an annual £70m in additional business rates revenue would be generated, over 17,000 retail jobs would be generated, and the resulting impact on GVA would be £400m per year.

Simon Roberts, chief executive of Sainsburys, said:

"All responsible retailers want to pay their fair share of tax, but the current business rates system has become an enormous burden on our industry. It is no longer fit for purpose. It has failed to keep pace with major changes in how customers are now shopping and how much our retail industry has changed over the last decade. As a result, it is directly causing store closures and job losses across the sector.

"We believe there is a better way - one that will contribute to higher economic growth and help our communities to thrive. Today's report shows that reducing business rates would enable businesses to invest in more stores, creating jobs and generating prosperity.

"We welcome the new government's manifesto commitment to reform business rates and hope that it will move quickly to deliver on this promise, which would deliver real benefits for communities, employees and businesses alike."

Paddy Lillis, general secretary of USDAW, added:

"The scale of the challenge the retail industry faces is huge, with very high numbers of job losses and store closures that are scarring our high streets and communities.

"A robust plan is needed for the future of retail work that addresses both the immediate and urgent priorities facing the industry and staff, as well as wider measures to help deliver better jobs. We need a co-ordinated and inclusive approach, involving all key stakeholders.

"The current business rates system is not fit for purpose, as it places bricks and mortar retailers at a significant disadvantage to online retail. In effect, this amounts to nothing more than an unfair tax on shops and action has to be taken to level the playing field."

Business rates reform

Enterprise Nation's small business manifesto for the new government calls for the business rates system to be replaced with a tax on the underlying land values, not productive investment.

Based on the 2023 Access to Space report, we also said rates should shift from being paid by tenants to being paid by landlords, be set annually, rather than operating through a five or three-year revaluation cycle, while the business rates' relief which landlords can claim for empty premises should be eliminated.