empty high street

More run down high streets will have mental health implications for local communities, the report warns

The government is heading toward a “tipping point” in falling tax take from retail without more support for the sector, retail chiefs have warned.

The tipping point loomed at the same time as a substantial loss of taxes from fuel, thanks to the transition to electric vehicles, the Retail Sector Council said. It called for a “joined-up discussion” of planned and foreseeable changes.

The Retailer Sector Council, whose members include chiefs of Sainsbury’s, Boots, Primark and the BRC, has fired a warning shot over the consequences for all areas of the economy in a report setting out its predictions for the future of retail.

It points to shopworker and store numbers falling, along with profits, meaning less property tax, income tax, national insurance, and corporation tax paid to the treasury.

Meanwhile, retail’s continued shift away from town centres will lead to more run down high streets, impacting local economies and mental health, according to the report.

It highlights ways the government could step in, including by levelling the playing field between online and bricks & mortar retailers on tax, reforming planning rules which help keep shops vacant and relaxing competition regulation to allow retailers to collaborate on sustainability.

The report – called Retail, the Great Enabler – is intended as a “starting point that will inspire further discussion among the sector, with industry experts and with government to help identify solutions”, according to Retail Sector Council co-chair Richard Pennycook.

“One of the things that we’re saying to government is that as cars go electric, fuel duty will reduce enormously,” said Pennycook, who is also former CEO of Co-op and current chairman of 2 Sisters Food Group.

As store numbers reduce, “business rates will reduce as well, so two very big sources of revenue for the government, if you take a 15-year view, are only going one way,” he said. “And somehow they’re going to have to fill that gap.”

Predictions in the report include a continued proliferation of discounters, fewer stores and online growth as bricks & mortar shifts to omnichannel. There will also be a consolidation of pureplay online operators, including failures, as markets become impatient with their inability to deliver on forecast potential, according to the council.

Dave McCarthy, senior advisor to HSBC Investment Bank, who wrote the report, said: “There’s so much rapid change going on [in retail] and that change has implications not just for the retail industry, but for the government, for society, for the consumer, for the economy.”

He said a “big take” from the report was that without a level tax playing field between online and bricks & mortar, including in business rates, there would be “less employment, lower tax take and a bad outcome for the high street as companies and stores are forced to close due to unfair competition”.