Four hundred of Britain’s largest shops could close as a result of the government’s planned business rates reforms, the BRC has warned.
The plans to increase rates for large properties will affect about 4,000 stores employing around a million workers in a sector already grappling with soaring costs and taxes, according to the BRC’s analysis.
The trade body has warned of a “fresh wave of closures”, with 400 of those large stores at risk of being rendered unprofitable and going the same way as the 1,000 that have already ceased trading over the past five years.
It would mean the loss of up to 100,000 jobs and cost local councils over £100m a year in lost business rates payments, the BRC said.
Legislation passed earlier this year enables Rachel Reeves to use her autumn budget to raise business rates from 2026 for larger properties with a rateable value of £500,000 or more. The extra tax collected is to pay for business rates to be lowered for smaller retail, hospitality and leisure premises with rateable value below £500,000.
The BRC said the higher tax rate would force larger stores to raise prices and employ fewer people, if not close entirely.
Earlier reports have suggested that more than 100 large supermarkets are among stores at risk of closure, and that about 50 of Sainsbury’s could become unprofitable.
The BRC is calling on the Chancellor to implement the discount for smaller shops to provide support for the high street. But it wants the discount to be funded by increasing the tax for all large properties except shops. The plans can still be revenue-neutral if the increase is made “slightly” greater for other large properties such as office blocks, where business rates are lower as a proportion of costs and the impact on jobs will be less, according to the BRC.
“Britain’s largest shops are magnets, pulling people into high streets, shopping centres and retail parks, supporting thousands of surrounding cafés, restaurants and smaller and independent shops,” said BRC CEO Helen Dickinson.
“After years of rising costs, far too many stores have disappeared – leaving behind empty shells that once thrived at the heart of our communities. Four hundred more large stores could disappear if the government forces them into its new higher tax band. This would mean up to 100,000 jobs lost, emptier high streets, and less revenue for the Exchequer.
“The Chancellor can back families, jobs and high streets this autumn, by excluding large shops from the new higher business rates tax band. This would not cost the Exchequer a penny, yet would help secure the future of 400 retail stores, and the communities they support, right across the country. But failure to act risks shuttering hundreds more stores, costing jobs, communities and the economy far more in the long run.”
The Grocer revealed last week that Treasury sources had raised the possibility of relaxing restrictions on Sunday trading hours to appease large retailers over the higher tax rate. It came after a delegation of chiefs of supermarkets and other large retailers met with Reeves at 11 Downing Street to oppose the plans.
Yesterday, the Treasury published an interim report on the business rates reforms outlining further proposals, including changing how the tax is calculated. Currently a business rates multiplier is used to calculate the bill as a proportion of a property’s rental value. This would change to a series of successive tax bands at increasing levels under the proposals.
The Treasury is also looking at ways to enhance small business rates relief, transitional relief and relief following improvements to properties, according to the report.
Dickinson said: “This report offers a useful blueprint of various areas to be explored further that could help the business rates system function more effectively. Retailers will appreciate the government considering how improvement relief can be enhanced.
“But for retail businesses, the most pressing question is how the government’s plan for a permanent business rates reduction for retail, hospitality and leisure premises will be implemented.
“Currently, retailers account for 5% of the economy yet pay over 20% of the total business rates bill, which is why such reforms are desperately needed. Until we get clarity on these changes, which isn’t expected until the budget, many local investments in jobs and stores are being held back.”
Co-op Group CEO Shirine Khoury-Haq said: “Today’s announcement on business rates reform is a welcome step forward, and we fully support the changes which will enable small and medium sized retail, hospitality and leisure businesses to invest, drive growth, and better serve their local communities.
“We welcome plans to enhance small business rates relief because of the value this will provide to the thousands of local stores which we wholesale to, and we have long said that businesses should be incentivised rather than penalised for investing in their stores.
“Most importantly, these reforms are vital because they will benefit 98% of shops across England which make up the backbone of high streets and shopping parades, playing a crucial role in local economies and local communities. They create jobs, foster connections, and build resilience. To succeed, these reforms must now be backed in the autumn Budget, with the multipliers set to deliver a fairer system that protects smaller, community-focused retailers.”
High Streets UK chair Dee Corsi said: “At a glance, the Treasury’s interim business rates report is encouraging.
“But look closer, and it is clear any celebrations would be premature. Businesses are only offered a ‘commitment to explore pro-growth’ measures, not pro-growth measures themselves. And large retail, hospitality and leisure businesses remain absent from the Chancellors plans, despite being significant national employers, community anchors, and important drivers of local and national economic growth.”
Hetal Patel, president of the Federation of Independent Retailers, said the latest proposals could positively impact smaller independent retailers opening a second property.
However, Patel urged the government to “fully consider the importance of the retail sector – especially small independent shops, which are often at the heart of their communities and have rightly benefited from rates relief in the past”.
“Many of our members had higher rates bills in April because of lost retail, hospitality and leisure relief in the last budget and will await this year’s budget and the business rates revaluation – which will occur for the first time since 2023 – with concern,” Patel added.
“We are keen for the government to introduce new permanent retail, hospitality and leisure multipliers as low as possible from 2026, and to upwardly rate small business rates for the very smallest businesses in line with inflation – but remain open to continued positive engagement in this area.”
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