Supermarkets trigger ‘punitive’ trade rates

Britain’s biggest supermarkets have increased pressure on Rachel Reeves to review the “punitive” business rates regime.

Retailers are facing rising costs following the Chancellor’s October budget.

And now bosses at Tesco and Sainsbury’s said looming increases in the tax – which is based on the value of a property and therefore hits brick-and-mortar stores more than online operators – could make the big boys sites are unviable.

Retailers, from independent traders to national chains, face a rise in business rates in April along with an avalanche of other costs imposed by Reeves.

This includes increasing employer-paid national insurance and minimum wage increases that reduce inflation.

In total, retailers face a £7bn cost rise and are calling on Reeves to ease the burden by reforming business rates.

Announcing a bumper set of Christmas trading figures, Sainsbury’s chief executive Simon Roberts described the tax as a “fundamentally difficult and unfair tax on retail”.

He said he will have to “look very carefully” at future hiring decisions given the rising costs the company faces.

“The size and scale of the costs facing the industry is a real concern,” Roberts said. “We are going to do everything we can to mitigate the impact, but there is no doubt that there is a lot of inflation building up in the system.”

Ken Murphy, his counterpart at Tesco, warned that “onerous” tariff bills were putting “the integrity” of the High Street at risk, especially in poorer areas.

The issue has been highlighted by the Mail’s Save Our High Streets campaign. Reporting a 6.8 per cent rise in sales at Sainsbury’s during the six weeks to January 4, Roberts sounded the alarm about the Chancellor’s plan to increase business rates charged on larger sites so that smaller shops pay less. The idea is to capture large warehouses used by companies such as online giant Amazon.

But there are fears that the measure will be counterproductive, since it will also affect large stores. Roberts said: ‘There are large areas of the UK where the supermarket plays a vital role at the heart of a community, and we need to ensure that business rates reform makes the current viability of those locations really clear.

“This is a fundamentally unfair tax, which all retailers would expect and call on the Government to look at urgently and across the sector to ensure we do not see the continued burden that this brings.”

Murphy said large grocers and department stores, from Tesco and Morrisons to Marks & Spencer and John Lewis, are “anchor tenants” attracting shoppers to the High Street.

“Those anchor tenants are often critical to maintaining the integrity of that main street,” he said. “The risk is that more and more of those large retail establishments become unviable.”

This is a particular concern for poorer areas with a struggling main street, he said.

Sainsbury’s celebrated its “biggest ever Christmas” as holiday food and fizz bottles flew off the shelves.

The supermarket will increase staff pay by 5 per cent this year, which will see the minimum annual wage for a full-time worker outside London rise from £22,882 to £24,026 in August.

Grim figures recently showed that more than 13,000 stores will close for good in 2024, a 28 percent increase on the previous year.

Industry experts at the Center for Retail Research (CRR) warn this will get even worse in 2025, with around 17,350 stores expected to close.

This would be the highest figure since the CRR began compiling its records in 2015.