The recent inflation figures are set to impact business rates significantly, challenging the retail industry.
- A drop in overall inflation to 1.7% is met with a rise in food inflation.
- Retailers are projected to face a £140 million increase in business rates.
- The British Retail Consortium warns of further investment damage without policy changes.
- Calls for a ‘Retail Rates Corrector’ gain momentum as economic pressures mount.
The Consumer Price Index has recently documented a decline in overall inflation to 1.7%, marking its first fall below the Bank of England’s 2% target in over three years. This decrease, however, coincides with a rise in food inflation, which has climbed by 0.6 percentage points, arriving at 1.9%. This complex inflation landscape poses challenges for the retail sector, particularly in regard to upcoming business rates.
As it stands, the retail industry is poised to absorb an estimated £140 million increase in business rates owed in the following April. This financial burden adds to the ongoing struggles within the sector, where investment in new shops and the creation of jobs are already hindered by high business taxes. Kris Hamer, director of insight at the British Retail Consortium, emphasised the detrimental impact of these rates, stating they are ‘damaging investment and preventing the creation of new shops and jobs.’
In examining the broader inflationary trends, it becomes evident that while transport costs have facilitated a downward push on inflation figures, the rises in food prices remain a significant pressure point, having escalated 1.7% month-on-month. Notably, inflation in sectors such as alcohol and tobacco has surged to 4.9%, whereas clothing and footwear inflation has subdued from 1.6% to 0.8%. This fragmentation is set against the backdrop of October’s expected headline inflation figure, projected to approach 3% following Ofgem’s energy price cap revision.
Within this challenging economic context, the British Retail Consortium advocates for decisive governmental intervention, proposing the introduction of a ‘Retail Rates Corrector’. This initiative seeks a 20% reduction in business rates levied on retail premises, aiming to correct the disproportionate tax burden relative to profits, which plagues the retail industry. Highlighting the pressing need for such measures, Hamer elucidated, ‘This measure would redress the imbalance that sees retailers paying a higher proportion of their profits in taxes of almost any industry.’
These inflation-driven dynamics underscore the urgent need for policy reform to support the retail industry’s stability and growth.
