Cut business rates to save jobs and boost growth

Employing more than three million people, retail is the lifeblood of our communities. As retail business and union leaders, we don’t always agree on everything, but on this we do: the No 1 barrier to growth in our industry is the outmoded business rates system.

Retail has been transformed over the past ten years, with online sales tripling to 27 per cent of total retail sales last year. But the business rates system is unchanged, reflecting an era when virtually all shopping was done in stores. This is why since 2018 more than 6,000 stores have closed, from small independent retailers to decades-long household names. Two thirds of closed stores cite business rates as a key factor in shutting up shop.

We represent 148,000 Sainsbury’s colleagues and 360,000 Usdaw members and wanted to understand how much the system holds back growth in our sector. So the consultancy Development Economics carried out an independent survey into what might happen if the system doesn’t change and the potential benefits if it did.

Their findings should concern us all. If our new government doesn’t make fundamental changes to the rates system, more than 17,000 more shop fronts will close by 2033. On average, that’s 15 more closures in every town in England alone.

This would hold back growth and employment, but it would also reduce funding for our vital public services. With more shops closing and more jobs lost, the reduction in Treasury revenue could hit £1.97 billion by the end of the parliament and £5.43 billion by 2033-34 — that’s nearly 80,000 new teachers or investment into hospitals and councils.

The challenge is that retail businesses account for 20 per cent of business rates revenue, despite making up only 5 per cent of the economy. Successive governments have promised reform but have only ever tinkered around the edges. The result? Shops closing, jobs lost, economic growth stunted. That’s why we welcomed the government’s manifesto commitment to level the playing field between the high street and online giants, to better incentivise investment, to tackle empty properties and to support entrepreneurship. After its historic victory, this government has a big opportunity to deliver on this promise and unlock the growth potential of retail.

No responsible business begrudges paying their fair share of tax. It’s their responsibility to contribute towards the public services we rely on. But our industry is united on the need for reform. A headline cut to retail business rates of 20 per cent — and the growth this would unlock — could safeguard and create more than 17,000 jobs and deliver an extra £70 million per annum to the Treasury after ten years. It could also boost GVA (gross value added) — the value of the goods and services produced, minus the value of the intermediate inputs that were used to produce those goods and services — by £400 million per year. Therefore, a 20 per cent cut to business rates would create jobs, protect government funding and unlock the much-needed growth we all want to see.

The government already has a full in-tray and we — businesses and unions — will do all we can to ensure it succeeds. Of course we all recognise the current fiscal pressures, but, by any measure, a government that revitalises growth, boosts jobs and secures long-term funding for public services will be able to look back on its achievements with pride. Reforming business rates won’t be a silver bullet to achieving all of this, but it would be a very good place to start.

Simon Roberts is the chief executive of J Sainsbury. Paddy Lillis is the general secretary of the Union of Shop, Distributive and Allied Workers