Business rates system ‘no longer fit for purpose’ says Sainsbury’s boss

The boss of Sainsbury’s has said the business rates tax system is “no longer fit for purpose” and warned that current planned increases will lead to thousands of high street closures and job losses.

The UK’s second-largest supermarket chain also backed calls for a 20% cut in business rates for retail companies.

Business rates are the property tax system for businesses, affecting sectors including retail, hospitality and leisure.

Labour has pledged to reform the current business rates system, committing to “levelling the playing field between high street and online retailers”.

It has said the reforms will be revenue-neutral – meaning any reductions will need to be offset elsewhere in the tax system – but it is yet to reveal further details of how it will overhaul the tax system.

Previous governments have also pledged to review and reform the business rates system, but it has still come under significant criticism from high street retail bosses.

Under the current system, business rates increased by around 6.7% in April for the current financial year and will rise next year by the UK CPI inflation rate for September.

This year the retail industry saw business rates increase by around £1.6 billion for UK companies.

Sainsbury’s and the Usdaw union have called for increases to be suspended and the overall rates payments from retail to be cut by 20%.

It said research, carried out by Development Economics, found that continued increases based on the current inflationary trajectory would make otherwise profitable shops unviable and “result in an estimated 17,300 closures by 2033/34”.

The study also found that over the course of the decade the Government would lose almost £5.5 billion in tax revenues linked to closures.

The research also claimed that a 20% cut would also protect and create more than 17,000 retail jobs which might otherwise be under threat.

Sainsbury’s chief executive Simon Roberts said: “All responsible retailers want to pay their fair share of tax, but the current business rates system has become an enormous burden on our industry.

“It is no longer fit for purpose.

“It has failed to keep pace with major changes in how customers are now shopping and how much our retail industry has changed over the last decade.

“As a result, it is directly causing store closures and job losses across the sector.”

The scale of the challenge the retail industry faces is huge, with very high numbers of job losses and store closures that are scarring our high streets and communities

Paddy Lillis, general secretary of Usdaw, said: “The scale of the challenge the retail industry faces is huge, with very high numbers of job losses and store closures that are scarring our high streets and communities.

“A robust plan is needed for the future of retail work that addresses both the immediate and urgent priorities facing the industry and staff, as well as wider measures to help deliver better jobs.

“We need a co-ordinated and inclusive approach, involving all key stakeholders.”