More than 50 retailers have written to new chancellor Sajid Javid demanding action to lighten the burden of business rates.

In a letter coordinated by the British Retail Consortium, industry leaders including Harrods managing director Michael Ward, Iceland managing director Richard Walker and River Island chair Clive Lewis proposed four ‘fixes’ to address the problem of business rates, which have piled ever greater pressure on retailers confronting harsh trading conditions.

Along with signatories such as Asda chief Roger Burnley, B&Q boss Graham Bell, Primark’s Paul Marchant and John Lewis Partnership chair Sir Charlie Mayfield, they asked for a freeze of the business rates multiplier, centrally funded upwards transitional relief, the introduction of ‘improvement relief’ and better resourcing of the Valuation Office Agency (VOA).

They wrote to Javid following new prime minister Boris Johnson’s plans for a business-boosting economic package as the likelihood of a no-deal Brexit grows.

They said “reform of the broken business rates system should be front and centre of that package” because at present “this outdated tax is hindering our plans for investment, holding back productivity growth and detrimentally impacting communities up and down the country”.

BRC chief executive Helen Dickinson said: “The new government has an opportunity to unlock the full potential of retail in the UK, and the prime minister’s economic package provides a means to do so.

“The fact that over 50 retail CEOs have come together on this issue should send a powerful message to the government. Retail accounts for 5% of the economy yet pays 25% of all business rates – this disparity is damaging our high streets and harming the communities they support.”

Lewis said: “The proposals offer solutions that can be introduced quickly and will have immediate benefits to the struggling retail sector.

“In particular, the removal of downwards transition will allow all retail businesses to pay a tax which more accurately reflects the value of their properties.

“The burden that rates places on all high street businesses not only stifles growth but is a major contributor to the closure of stores and the resulting decline in towns across the country.”

Ward said: “Our hope is that this new government has both the foresight and the ambition to undertake a drastic review of Britain’s outdated business rates tax system.

“A good start in ensuring we have a tax regime fit for the 21st century would be ensuring that any proposed economic package this autumn contains the common-sense measures proposed today.”

Walker said: “Business rates are an outdated Victorian taxation system that have little relevance to our modern, multichannel retail economy. Fundamental reform of the system is the only way we will stem the decline of high street communities.”

Business rates have climbed by 50% since their introduction in the 1990s and by 20% in the last decade. They are among the rising costs as a result of public policy that have contributed to a decline in retailers’ profit margins from 4% on average 10 years ago to 1.5% today.

The demand comes a day after it emerged that Tesco, the UK’s biggest retailer, was canvassing support from other bricks-and-mortar retailers for the introduction of an online sales tax.

Tesco chief executive Dave Lewis is campaigning for the government to cut business rates by 20% and cover the shortfall with a 2% tax on online sales. He believes this would level the playing field with online giants such as Amazon.

The demands in detail

Freeze rates multiplier

Business rates rise annually based on the CPI rate of inflation. The BRC said a freeze would “give business a vital and immediate relief from recent cost increases and give them certainty of their rates liabilities for the following year, aiding their investment and business planning”.

Centrally fund upwards transitional relief

Business rate increases are staggered over a valuation period, funded by similarly staggered rates cuts for others, “meaning that even where a revaluation results in a lower rateable value for a property, a business must still pay an artificially higher business rate in order to subsidise an artificially lower business rate for someone else”.

The BRC said the existing approach “is distorting market forces and only works to the benefit of businesses in London and the south of England, and against those in the North and Midlands”. The change, which it was argued would complement the objectives of the £675m Future High Streets Fund, would cost £295m for 2020/21, the final year of the current valuation period.

Improvement relief

Property improvements such as the introduction of solar panels increase a premises’ rateable value. That disincentivises investment in work “which would otherwise improve the quality of the property, add value for both the tenant and landlord and, often, meet public policy objectives such as improved energy efficiency or reduced crime”. The BRC wants the associated increase in rateable value to be exempt from rates liability for a three-year period.

Full resourcing of the VOA

This would allow challenges and appeals to be progressed more speedily than at present. It would also enable the agency to move faster to deal with 16,000 unresolved appeals. The BRC said: “A relatively small upfront investment in the VOA would greatly transform ratepayers’ everyday burden of, and frustration with, the bureaucracy of the business rates system.”

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