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UK retail sector in decline due to unfair tax system

Posted on by angelo
UK retail sector in decline due to unfair tax system

The British Retail Consortium’s (BRC) budget proposal shows that the retail sector is overtaxed compared to other sectors of the economy. Credit: Shutterstock.

The findings published in the BRC’s Budget Report show that UK retail contributes 7.4% of total corporation tax, despite accounting for just 5% of GDP – 1.5 times higher than other sectors. This £33bn tax bill represents 55% of pre-tax profits, with 11% of that absorbed by corporation tax alone – the highest proportion of any sector.

The study highlights the heavy toll this tax burden has taken on the retail sector. Over the last five years, the UK has lost 6,000 stores, with council tax playing a significant role in two thirds of these closures. Looking ahead, the BRC warns that up to 17,300 more stores could close over the next decade if no meaningful action is taken.

Credits: ONS, HMRC and OBR publications

Beyond closures, the report notes that the tax system is holding back investments in critical areas like employee wages, continuing education and technology that could otherwise boost productivity and support decarbonization efforts.

The BRC proposal calls for the introduction of a 20% retail rate adjuster, which would reduce retail tax rates by 20%. This adjustment would deliver on the government’s manifesto commitment to a “fairer tax for physical shops” and support the recovery of the UK’s high streets.

According to the BRC, such a move would not only level the playing field for physical retailers, but also open up investment opportunities across the sector.

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Helen Dickinson, BRC chief executive, stressed the urgency of reform, saying: “Our research conclusively proves what retailers have known for years: the sector is paying far more than its fair share of tax. The Chancellor has a golden opportunity to address this and use the scale of the sector to help deliver some of the Government’s priorities.”

As retailers grapple with closed stores, job losses and missed opportunities for long-term growth, the BRC highlights that the Retail Rates Corrector could provide immediate relief, allowing businesses to reinvest in their future and reinvigorate high streets across the country.

Earlier this month (September), it was revealed that total UK retail sales increased by 1% year-on-year in August. However, industry experts have expressed concern that a tough retail environment could dominate the rest of 2024 unless the upcoming October Budget delivers decisive action on business tax rates.