British retail is a success story and is continually evolving, incorporating new forms of shopping. Amidst the talk of the decline of the retail sector, our evidence highlighted the fact that the retail sector as a whole is buoyant, with growing opportunities. It is also a source of employment for around 3 million people.
Business rates are a substantial cost to doing business in the United Kingdom, and are one of the highest forms of local property tax in the European Union. Our evidence overwhelmingly cited the issue of Business Rates as one of the principal threats to the survival of existing retail businesses in the High Street. It was also cited as the biggest obstacle to new retail businesses starting up, not only for 'bricks and mortar' shops.
We conclude that Business Rates, in their current form, are not fit for purpose. The Government needs to carry out a wholesale review of the current Business Rate system. While this is a matter for the Treasury, the Department for Business, Innovation and Skills needs to play a leading role in that review, to reflect the needs of businesses. In particular, it needs to impress upon the Treasury and the Department for Communities and Local Government the importance of the retail sector as a driver of economic recovery. This is especially pertinent for small and medium-sized businesses.
This review of the Business Rate system should include: whether retail taxes should be based on sales, rather than on property; whether the retail sector should have its own form of taxation, calculated in a different way from other businesses; and how frequently the revaluation of Business Rates should take place.
The Government's Retail Strategies, which were the starting ground of our inquiry, are full of good intentions. However, they will be undermined unless the key issue of Business Rates is addressed.
The responsibility for Retail is shared by both the Department for Business, Innovation and Skills, and the Department for Communities and Local Government. While there are benefits to be gained from this approach, we believe that the BIS Department should be the senior partner in this relationship. It must take responsibility for the strategic plan for the future of the retail sector. Without this leadership, the many welcome initiatives will not deliver on their ambitions.