By guest author Elias Jashan from Retail Gazette
- Retailers with 10 or more stores have already closed 5834 shops in 2019
- This is a 77 % increase on the whole of last year, according to the Centre for Retail Research
- 708 shops closed through administrations, 333 shops closed through CVAs, and another 4793 closed through cost-cutting schemes
The impact the business rates tax regime is having on town centres has been laid bare in new research that shows high street chains have closed nearly 6000 stores so far this year.
Retailers with 10 or more stores have already closed 5834 shops in 2019, up 77 % on the whole of last year, according to the Centre for Retail Research.
So far this year, between January 1 and September 30708 shops have been closed by large retailers falling into administration while a further 333 shops were closed through CVAs, another insolvency procedure used to close loss-making stores.
Meanwhile, a further 4793 shops have been shuttered by large retailers through “rationalisation” as part of cost-cutting programmes.
In the first nine months of 2019, 2531 more shops were closed by large retailers than the 3303 closed during the whole of 2018.
Centre for Retail Research director Professor Joshua Bamfield attributed the closures to high costs, low profitability, the rapid growth of online companies and the lack of investment in stores coupled with weak forward planning.
Major chains including Karen Millen, Jack Wills, Bathstore, Patisserie Valerie and Debenhams all went into administration or pre-pack administration this year.
Meanwhile, Sir Philip Green’s Arcadia Group retail empire launched a CVA.
The position is set to worsen with Mama and Papas recently announcing that it would be closing stores through a pre-pack administration, Mothercare intends to close all UK stores having gone into administration earlier this month, and Clintons is eyeing the closure of one in five of its stores if it is CVA is approved by creditors in the coming weeks.
Prime Minister Boris Johnson has said a future Conservative government will extend the retail discount on business rates to 50 % next year in England, for those properties with a rateable value less than GBP 51000.
This is up from 33 % and is an attempt to try to stem closures while committing to launching a fundamental review of the tax, ensuring the overall tax burden is reduced as a result of that review.
September’s 1.7 % inflation rate will see business rates bills rise by GBP 94.5 million next year for those retail properties in England with a rateable value over GBP 51000, therefore not entitled to the retail discount, according to detailed analysis by real estate advisers Altus Group.
The retail discount is subject to EU rules which restrict state aid to EUR 200000 (GBP 171000) per business over a three-year period.
“Most large chains will have reached the de minimis regulation limit (the cap) this financial year and will effectively be precluded from the enhanced discount,” Altus Group head of UK business rates Robert Hayton said.
“But the commitment to lower the overall burden will be a welcome relief with the standard rate of tax having gone above 50 % and at its highest level since 1990 – with the rate set to rise further in April.”