Retailers call for high street restructure, with sales tax to replace business rates

Retailers urged the government to urgently review business rates and set a sales tax on digital retail giants such as Amazon to save the UK's high streets.

A report into the sector has recommended Chancellor Philip Hammond to do away with business rates altogether for stores and slap a 2% sales tax on all transactions for both high street and online retailers.

The independent high street review, carried out by Bill Grimsey, former boss of Iceland, Wickes and Booker, also said: “We have to accept that there is already too much retail space in the UK and that bricks and mortar retailing can no longer be the anchor for thriving high streets and town centres. Town centres need to be repopulated as community hubs.” These hubs would include housing, offices, libraries, public spaces and some shops.

Grimsey also called for the creation of a Town Centre Commission to develop a 20-year strategy for local high streets and the effects of digital transformation on smaller towns, free high street parking for up to 30 minutes, as well as improved street lighting and free public wi-fi.

Business rates across the UK increased by 3% in April, in line with inflation, figures from Altus Group have showed, while rates for some online retailers dropped during the same period.

Amazon is paying as little as £27 per square foot for its warehouses, which is up to 12 times less than high street chains. The US tech giant's business rate bill for its depots this year came to around £14m, down 0.7% on last year and half the total faced by struggling House of Fraser. Asos, the online clothes seller, is another of many e-tailers paying less on their distribution centres in 2018 than last year.

Steve Rowe, chief executive of Marks & Spencer, told the Financial Times that the company had to close its Covent Garden store after it faced a rate rise of almost £500,000 in a year. He said the rates were “an unfair burden of taxation directly contributing to the challenges the high street is facing”.

Amazon dismissed the findings and said the figures did not take into account rates paid on other premises: “The research is inaccurate and incomplete, only including 11 of our 100 plus sites across England and Wales we operate to run our website and deliver parcels to customers. Amazon pays tens of millions of pounds more in business rates in England and Wales than suggested by the research and our business rates bill has increased significantly in 2018.”

Retailers have warned that without an urgent reform, these higher rates could kill the high street since a number of firms including Maplin, Toys ‘R’ Us and Poundworld have all gone into administration this year and a few others have closed stores.

The Grimsey review pointed to fears for the effect of the business rate burden on shops, with job losses of 70,000 expected this year and up to 382,500 high street jobs lost by the end of 2022, with the UK high seeing 100,000 empty shops in ten years.