UK empty shops rate down – but it’s a mixed picture, says BRC

The percentage of empty shops in town centres has fallen from a record high – 11.9% in April – to 11.1% in July, according to the British Retail Consortium (BRC). Meanwhile, footfall was up 0.8% on a year ago, due to strong demand for summer food, fashion and outdoor items as a result of the warmer weather. The greatest improvement in shopper activity was in the high street, where retailers reported growth of 2.3%. Out-of-town locations experienced a rise of 0.9%, while shopping centres suffered a fall of 2.3%.

“It seems that occupiers are starting to return to the high street, suggesting a greater degree of optimism over future trading prospects,” commented Diane Wehrle, retail insights director at the BRC’s survey partner, Springboard. She said footfall had risen by 1% over the quarter as a whole, and this was likely to have contributed to the drop in the vacancy rate.

But there are still sharp regional variations, according to the survey.  Northern Ireland’s empty shops rate of 18% in July was only slightly down on the April figure. In Wales the rate was 15.9%, compared with 17.9% in April.

The vacancy rates for Greater London (7%), the south-east (8.8%) and Scotland and the east of England (both 10.1%) were all below the UK average.

“Stark statistic”

BRC Director-General Helen Dickinson said that although the marginal fall in the overall vacancy rate was encouraging, “it’s still a stark statistic, which masks widespread variations – six parts of the UK had above-average vacancy rates. There’s a little more cause for cheer on the footfall front, with the fourth positive result for high streets since the start of the year driving a decent increase overall. Retailers responded well to the heatwave and accompanying demand for summer food, fashion and outdoor living items.

“Taken together, these figures paint a mixed picture which further fuels our call this week for long-term reform of business rates to help town centres across the UK. We’ve seen some cause for cautious optimism since the start of the year, but the path to recovery remains fragile. Bringing business rates into line with how town centres operate in the 21st century is a surefire way of offering retailers more certainty and scope to invest.”

The BRC recently called for future increases in business rates to be capped at 2%, in place of its previous “unrealistic” demand for the levy to be frozen.

Treasury is against online sales tax

Meanwhile, on Sunday the news came that the Treasury was not in favour of the online sales tax demanded by bricks-and-mortar retailers who had argued that they face an “unlevel playing field” because of business rates levied on properties.

Ocado’s chief executive, Tim Steiner, said on Sunday: “We are delighted that the Treasury is against placing an extra burden on innovative industry operators in the most dynamic part of the economy.” He had fanned the row between the two factions in July by saying: “Bricks-and-mortar retailers need to shut more shops and stop moaning about it.”

Longer-established retailers – including Ocado’s business partner Morrisons – had argued  that the business rate system was overdue for a shake-up. Sainsbury’s CEO Justin King proposed a US-style online tax system as a possible alternative, while Morrisons CEO Dalton Philips said that new trends required new taxes. “As more and more sales migrate online, it seems to me intuitive that you would tax the online channels as well,” he said.

“Broad consensus around the need for reform”

The BRC had urged companies to end the infighting and focus on reforming business rates. Reacting to the Treasury’s reported opposition to an online sales tax, BRC Director-General Helen Dickinson said: “The whole question of an online tax has had a lot of coverage but it’s not the place to start. It’s important that common principles should apply to all businesses – but the principles that apply at the moment are from a bygone age. Business rates in particular have long since ceased to be fit for purpose. It’s time to acknowledge that there is a broad consensus around the need for reform.”

A recent report by PricewaterhouseCoopers found that business rates were higher than corporation tax. For every £1 of corporation tax, the top 100 retailers paid £1.44 in business rates. Online retailers still have to pay rates on the warehouses they use, but, because the rates are calculated on rent, they are far lower than on a busy high street.

For advice on any aspect of running a retail business, whether online or bricks-and-mortar, email me or call me on 020 7099 2621.