Retailers face uncertain future as inflation hits five-year high

British retailers could be hit with an extra £270 million in tax next April if the government fails to freeze business rates, experts have warned.

Figures released today by the Office of National Statistics reveal that inflation in September stood at 3.9%.

This RPI (Retail Price Index) rate will be used to determine the uplift in business rates next April, which will mean that retailers will see nearly a 4% rise in their rates bill, according to the British Retail Consortium.

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BRC chief executive Helen Dickinson said today’s RPI figures could be severe for many shops in a precarious position and struggling to survive.

“For many shops this may be the last straw. Across the country, especially in economically deprived and vulnerable communities, the cost of failing to take action will likely be seen in yet more empty shops and gap-toothed high streets,” she said.

“There are also other risks. Those shops who continue to trade may look to pass this extra rates cost onto hard pressed consumers.

“Ministers mustn’t bury their heads in the sand. In his Budget next month, the Chancellor needs to get a grip on the matter and rule out a rise in business rates to help save shops, protect jobs, and preserve high streets.”

Global real estate agency Colliers International has called on the government to switch the current business rates indexation from the RPI to the CPI (Consumer Price Index) measure of inflation before 2020.

“If business rates were tied to CPI figures (currently running at 3%) instead of RPI, at least some of the pain would be reduced,” the firm explained.

John Webber, head of Business Rating at Colliers said: “The Treasury has recognised that many retailers are suffering from the business rating revaluation in 2017 and has finally accepted that CPI rather than RPI is a fairer measure of inflation to link business rate rises to. So why instead of introducing the new indexation immediately, is it waiting three years to 2020? How much pain do retailers have to suffer? With inflation on the rise at the moment, by the time we reach April 2020, we could see some very uncomfortably high rating levels.”

The Treasury has claimed the change to CPI indexing would save companies £1bn in the first three years, including a £250m saving for the retail sector, according to Colliers.

“If this is the case, the Government should act now. Many businesses have been hammered in the recent business rates revaluation, particularly the high street retailers and with delays in receiving promised reliefs and the failures of the new business rates appeal system, many are finding themselves squeezed or even worse,” added Webber.

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