Opinion: Supporting retail this election is just good politics

One that accounts for 5% of the UK economy, contributed £97.1bn by gross value added, invested over £1bn in research and development and another £1.1bn in new technologies in the last year alone.

Our industry employs around 3 million people and has higher productivity growth than almost any other. We are an industry that serves, paying £17bn in business taxes – equivalent to funding our entire police and fire and rescue budgets.

“Any tax that requires so many sticking plasters is clearly in need of surgery”

But beneath this gloss lies a dramatic transformation. At one end we have seen tens of thousands of jobs losses each year, increasing store closures and declining footfall at shopping locations. At the other end lies an innovative and exciting industry that is expected to create £381bn in spending by 2024.

The future is uncertain as retail approaches a fork in the road. One path leads to a fitter, slimmer industry; one that offers better jobs at higher wages, with the effective use of technology to deliver a seamless integration of digital and physical shopping. The other path would see an industry weighed down by increasing public policy costs, with store closures and job losses continuing unabated.

Tipping point

The government can play its part. Our manifesto, A Vision for The UK Retail Industry, will be released in the coming weeks and will be the focal point of our activity ahead of the forthcoming election. It will outline our recommendations for a comprehensive, cross-government strategy for retail, as well as measures to reform funding for digital skills and tackle both in-store crime and online fraud. But one issue looms larger than most for the industry.

While Brexit might dominate the airwaves, the burning issue for most physical and omnichannel retailers is the huge business rates burden that they now suffer under. In August, the BRC coordinated a letter to the chancellor, signed by over 50 major retail chief executives, urging him to tackle the Byzantine burden of this broken tax. Three out of four recommendations from the letter were also echoed in the Treasury committee’s excellent report on business rates, released this week.

I’ve lost count of the number of times that retailers have told me the rates bill is often the tipping point between a shop carrying on trading or closing, with all the knock-on impacts on the rest of the local high street and community.

To be fair, chancellors over the years have recognised that the business rates system is flawed. There are myriad reliefs available, which may be individually justifiable, but which over time have created a system that is hard to understand and expensive to navigate. Any tax that requires so many sticking plasters is clearly in need of surgery.

Crucial fix

While we have long campaigned for wholesale reform, there is one thing the government could do in the next budget that would be implementable from April – scrap downwards transition, which is taking £1.3bn from retailers over five years and being used to subsidise other industries.

Downward transition prevents firms that are overpaying on their business rates from being put onto the correct tax level – instead stepping them down gradually in order to subsidise those that are found to be underpaying. This distortion is neither fair nor efficient.

“As parties draw up their manifestos, they should spare a thought for their local shops and the 3 million voters they employ”

This crucial fix would provide £295m of relief to retailers next year alone, more than double the extra cost they will bear from inflation-linked business rates rises of £137m in England alone. It’s no silver bullet, but it is realistic, costed, practical and implementable.

A December election provides a key opportunity for such a fix. As political parties draw up their manifestos, they should spare a thought for their local shops. For the 3 million voters those shops employ, the 65 million people those shops serve and the £17bn in tax those shops contribute.

Supporting retail is not just good policy, it’s good politics.