Thursday 5 July 2018

"Government urged to slash business rates to save UK high streets"

This week's prize for people who completely undermine their own logic goes to...

From The Independent:

Sainsbury’s boss Mike Coupe joined the calls for reduced rates on Wednesday.

After the supermarket chain announced slowing sales growth on Wednesday, Mr Coupe said: “There isn’t a level playing field between online players and traditional bricks and mortar players, and it’s playing out in a very stark way on the high street at the moment.”

He added the government needs to review “total business taxation”. Sainsbury’s paid £560m in business rates last year, 6 per cent of its overall tax bill.


Yup, a modest 6 per cent. VAT is by far and away their biggest bill (unless you believe the crap about consumers paying it); PAYE is probably not too bad because most staff are on fairly low wages; and corporation tax is chump change.

Their total turnover is £28 billion (page 94 of latest financial statements), divide one by t'other and Business Rates cost them 2p for every £1 of sales. If they think online is so easy, why don't they do it themselves and save the 2p. Ah, they do. So what's the problem?

20 comments:

ontheotherhand said...

Well, I see a lovely little £10,445m worth of Land and Buildings on their balance sheet that would be worth a lot more if it had an exemption from Business Rates. Bonuses and share options all round. Job done.

Mark Wadsworth said...

OTOH, got it in one.

mombers said...

I was about to ask that, OTOH!

Woodsy42 said...

Of course what the authorities will hear is 'level the playing field' and translate that to putting UP the business costs on internet box sellers. I do feel desperately sorry however for the small and specialist high street shopkeepers who are having to pay stupid amounts, and are the people without whom nodody would ever bother to go near a high sreet.

Mark Wadsworth said...

W42, some of the valuations are a bit out of whack, that is true. But can you give me some examples of "small specialist shopkeepers"?

James Higham said...

So what's the problem?

None.

Shiney said...

As JH says - what's the problem?

Don't hear Aldi and Lidl moaning do we? Probably because their business model isn't fucked like Sainsbury's and their ilk (JL sand M&S). They've all been found out - overcharging by 20-30% for the same products, from the same suppliers (like me) - so their margins have been trashed.

Tough is all I can say. If they want to save money, they could start off by shutting the swanky head office in Central London and moving to somewhere cheap.

Shiney said...

@W42

"small and specialist high street shopkeepers" - how very middle class.

If they are small and specialist they'll have the margins to cope, won't they? And if they don't they should put their prices up if their stuff is so 'specialist'. They are probably in swanky locations as befits their status - so, again, like with the big guys - tough luck, pay up or move to somewhere cheaper.

Woodsy42 said...

Small specialist shopkeepers who have gone, here are some I can remember off the top of my head: The record store run by a music enthusiast, the small family butcher, the independent sewing shop my wife used to use, the specialist model shop doing all sorts of balsa, plastic and radio control models, the 'bulk' food shop - years ahead of its time - where everything from flour to dried fruit came in bulk and they dispensed it into paper bags. The small specialist tool shop, the family owned hardware shop, the lock and security specialist, the independent small music shop who would get any sheet music, had everything from guitar strings to saxaphone reeds and did instrument repairs. I'm sure there are more. I know that changing shopping habits, the internet, rents, people retiring etc have been major factors in making these small independent shops uneconomic, but I know from talking to some of them when they closed that a huge factor was the escalating cost of keeping open. Small independents don't make large profits but rates are not based on profit or turnover. Many of the premises are now charity shops who pay no rates and all those places are no longer there to make a trip into town worthwhile or interesting.

Woodsy42 said...

Shiney, there are few swanky locations around this area of North Staffordshire!

Mark Wadsworth said...

JH, Sh, thanks.

W42, if these shops provide stuff that is really in demand, they could relocate a few streets away to somewhere cheaper and people would still flock to them.

The point is, there isn't much demand for records (sniff), family butchers, model shops, sheet music any more. Those people who really value the product are prepared to go a few miles out of their way to buy it (or buy it online).

Unless you're a hipster in a hipster area, where there'll be loads of these niche shops :-)

Mark Wadsworth said...

W42, re your comment on charity shops.

Yes, there are too many of them. But remember - business rates is like LVT, it is a tax on landlords. The reason there are so many charity shops is because there is a significant business rates discount for charity shops. So if one landlord wants to keep his building out of use while holding out for higher rent and minimising costs, he gets a charity in.

The problem is, that they are not exactly magnets for shoppers, so neighbouring proper shops lose trade, rinse and repeat until the whole parade is just charity shops.

formertory said...

I saw Grimsey interviewed by the BBC muppet on the local evening programme. Muppet asked him how the lost taxation revenue would be recovered by the Treasury; ah, quoth Grimsey, well, a Sales Tax of 2% would cover it neatly. He was smiling broadly as he said it.

Turning back to camera, the muppet then asks viewers "Let us know what you think - are YOU prepared to pay an extra 2p in the £ to Save Our High Street?" Cue predictable outrage from email comments.

Sometimes, swearing at the TV just isn't enough.

BTW, why is that Captcha thing on steroids now? Is it because I've rejected some bastard cookie somewhere, courtesy of the EU screwing about?





Lola said...

Intriguingly our BR bill is also about 2% of revenue for a town centre office with parking. That bill pales into insignificance against 'compliance' costs - about 16% of revenue and income and NIC taxes about 10% of revenue for owners and staff combined. And of course our landlord 'pays' the BR...

Lola said...

W42 I spoke to the operators of a kitchen tools and equipment shop who were closing down. Their premises were in a prime-ish location. Their rent was (from memory) about 40,000 per annum and the BR would have been a fraction of that. Yet they were closing 'because of BR'. I asked them had they asked to reduce the rent? Landlord would not entertain it. They would wait until a charity came along..

ontheotherhand said...

MW 'unless you're a hipster in a hipster area'. There is another rare way, and it does involve a butcher in the real example. There is a family that owns a lot of the land around Marylebone including shops and houses. Think of that what you will, it creates an interesting set of incentives. They charge below market rents to shops that they think will drive up the price of all the nearby houses they own. Otherwise the high street is full of Starbucks and Vodafone. They have the Ginger Pig butcher for example.
Could LVT be tweaked in this way? I'm thinking that a council would be interested in reducing LVT for certain shops because the LVT would go up on all the housing. But I'm also thinking, landlords would be able to up their rents, and who in the council would decide what a 'good' shop is? (I'm worried that like VAT we would end up with category arguments, like Twix a biscuit or a chocolate?)

Dinero said...

Do landlords receive full rent on charity shops, if they do then is Charity shop strickly speaking a correct moniker.

Lola said...

D. In my town I am told that CS's pay a premium rent because they don't pay, or pay a reduced BR. Proof positive that BR is a tax on landlords.

Mark Wadsworth said...

FT, that's the point, with a 2% sales tax instead of Business Rates, Sainsbury's would come out with plus/minus nothing.

L, thanks.

OTOH, yes, I have heard this suggested before, and the idea is not without some merit. But giving tenants a lower BR bill would only work if rents were also capped (else LL just soaks up BR savings), add this to the problem of choosing desirable businesses...

Din, I believe that LLs charge charities much lower rents i.e. what they can afford. Or maybe L is correct, and they charge slightly higher rents?

Bayard said...

"Small independents don't make large profits but rates are not based on profit or turnover."

AFAIK, business rates are based on rentable value. If the rates are "too high", it means that the rents are too high. I'm prepared to bet that a hell of a lot of business rates are based on outdated rental values.

"They charge below market rents to shops that they think will drive up the price of all the nearby houses they own."

I wonder if they have had the chutzpah to ask for the business rates to be reduced in line with the new "rentable value" of the premises.