Financial burden of high street business rates concerns Treasury Committee

MPs say they are “increasingly concerned” about the impact of business rates on high street retailers after questioning if they were still “fit for purpose”.

Treasury Committee chairwoman Nicky Morgan said MPs were likely to scrutinise business rates further as part of its Autumn Budget inquiry later this year.

Mrs Morgan made the comments after publishing a letter from Chancellor Philip Hammond in which he said the Government “recognises that business rates can represent a high fixed cost for some businesses”.

Mrs Morgan wrote to Mr Hammond in June about the committee’s concerns around the “financial burden” of business rates on the high street, asking if the Chancellor believed business rates were still fit for purpose and if the Treasury had analysed the competitive advantage for businesses that focused on online sales.

Commenting on the correspondence, Mrs Morgan said: “It’s clear that many bricks and mortar stores are struggling to remain competitive against online retailers, with the Chancellor admitting business rates can represent a high fixed cost for some businesses.

“The Treasury Committee is increasingly concerned with the financial burden that business rates are placing on high street businesses, and has examined the issue in its inquiries into VAT and the Valuation Office Agency.

“We are likely to scrutinise business rates further as part of our Autumn Budget inquiry later this year.”

The committee’s comments come as the New West End Company, representing more than 600 retailers, hoteliers and property owners in London’s West End, published two reports calling for the introduction of a revenue based tax to replace business rates for online businesses.

It said a 1% tax on online businesses could raise over £5 billion to ease the business rates burden faced by high street retailers.

Online companies currently pay one tenth of the business rates paid by high street retailers.

The rise in business rates are considered a major contributing factor to the increasing number of retail and restaurant closures across the UK.

The New West End Company said last year’s rates revaluation saw business rates for stores in London’s West End rise by an average of 80%, while some stores experienced rate increases of over 130%.

New West End Company chairman Peter Rogers said: “The current structure of business rates, whereby they are linked to the value of occupied property, not economic performance, provides online retailers with an unfair advantage and a 90% rate discount in an already struggling bricks and mortar retail environment.

“London’s West End is a major contributor to the UK economy with retailers generating over £9 billion in sales a year and employing over 80,000 people.

“If we do not act now we damage the ability of those business to survive and continue to drive our economy.”