The retail sector’s tax burden emerges as a key issue, highlighting significant disparities.
- New findings indicate that retailers pay 7.4% of all business taxes, which is disproportionate to their 5% GDP share.
- The high tax rate impacts profitability, with taxes consuming 55% of pre-tax profits in the retail sector.
- Business rates alone account for a significant portion of these taxes, leading to widespread store closures.
- The BRC advocates for a 20% Retail Rates Corrector to alleviate this financial strain and encourage investment.
Recent research unveiled by the British Retail Consortium (BRC) exposes a significant tax inequality faced by the retail sector. Reportedly, retailers contribute 7.4% of the total business taxes while only encompassing 5% of the nation’s GDP. This discrepancy highlights the disproportionate fiscal responsibility placed on retailers compared to their economic footprint.
The imposed tax structure is having a profound impact on retailers’ profitability as 55% of their pre-tax profits are consumed by taxes. This issue places the retail sector among the highest taxed, on par with hospitality, intensifying the financial strain and hindering growth potential.
Moreover, business rates alone are responsible for a substantial 11% cut into profits, the most severe among any business sector. This heavy burden is visibly reflected in the increasing number of shuttered stores, with 6,945 outlets closed in 2024, averaging 38 closures per day. The persistent financial pressure from these rates disincentivizes investment and accelerates the decline of high streets across the UK.
The fiscal challenges faced by retailers had been recognized in the Labour party’s election manifesto, which criticized the current business rates system for its detrimental impact on investment and its role in contributing to the uncertainty that plagues high street businesses. The UK has witnessed the closure of 6,000 shops over five years, two-thirds of which cited business rates as a significant factor influencing their decision to close.
Looking forward, the BRC has proposed a 20% Retail Rates Corrector in its submission to the Autumn Budget, urging the government to implement this adjustment. This measure is positioned as a strategic move to realign fiscal policies with economic realities, thereby empowering retailers to make meaningful investments towards productivity, decarbonization, and economic growth. BRC CEO Helen Dickinson emphasized, “Our research conclusively proves what retailers have known for years: the industry is paying far more than its fair share of tax.” She advocates for the Corrector as a means to level the playing field and revive high streets.
The BRC’s proposal presents a pivotal opportunity for policy reform, essential for future retail growth.
