High Streets Initiative · 9 October 2018

Embattled retailers demand end to “disproportionate” tax rates

Retailers have urged policy makers to create a level playing field on taxation

Retailers suffered a September sales slowdown prompting the industry to call for an urgent reduction in detrimental tax rates and clarity over Brexit.

According to the latest BRC-KPMG Retail Sales Monitor, UK like-for-like retail sales fell 2% during September compared to the same time last year when they rose 1.9%. On a total sales basis, sales rose 0.7% compared with an increase of 2.3% last September.

Over the three months to September, in-store sales of non-food items fell 4%, with food sales rising 2.3%. Online sales of non-food products grew 5.4% in September against a growth of 10.7% in September 2017. This is the lowest growth since January.

“These figures lay bare the difficult operating environment for the retail industry,” said Helen Dickinson, chief executive of the British Retail Consortium.

“After a challenging August, constrained consumer spending in September has resulted in the weakest sales growth for five months.”

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Dickinson added that retailers overpaid on taxes and business rates, and called on the government to address the imbalance.

“The retail industry pays a disproportionate amount of tax. It represents 5% of the economy but pays 10% of business tax and almost 25% of business rates. A tax system skewed towards high taxes on people and property is contributing to stores closures and job losses and is stalling the successful reinvention of our high streets.

“Taxes apply to all businesses, so the answer is not additional taxes solely on the retail industry. The government urgently needs to reduce the business rates burden and create a tax system fit for the 21st century that more fairly distributes taxes right across the economy.”

Paul Martin, UK head of retail at KPMG, added: “Last year consumers were remaining more defiant in the face of Brexit and shopping regardless. Grocery continued to perform, but growth in the category retreated in September. The non-food categories, however, continued to disappoint. The historically reliable back-to-school push did not elevate apparel sales. Instead, the latest tech launches were a rare source for optimism.”

Jon Woolven, strategy and innovation director at IGD, said Brexit nerves were partly to blame for the drop in consumer confidence. “Shopper confidence has followed a downward path with those expecting to be financially better off over the year ahead dipping from 26 per cent in July to 22 per cent in September. Brexit related uncertainty probably plays a part in this, so retailers will be hoping for a clear resolution ahead of the Christmas shopping season,” he said.

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