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Retailers 'face concerns over margins' as they plan for additional £270m in businesses rates in 2018

Laura  Barnes
Retailers 'face concerns over margins' as they plan for additional £270m in businesses rates in 2018

The British Retail Consortium (BRC) and Nielsen have announced their latest shop price index for October 2017, revealing that shop prices decreased at the same annual rate as in September.

The 0.1% deflation is the shallowest deflation rate in the last four years.

“Forces on inflation are pulling in both directions,” said Helen Dickinson OBE, chief executive of BRC. “On the one hand global food prices continue to head upwards at the same time as the weaker pound has left retailers facing significantly higher bills for imported goods. On the other hand, the tightening squeeze on discretionary spending power is reducing the ability of retailers to pass on increased import costs.

“These dynamics are playing out differently across the industry. Food inflation remains firmly in positive territory, while Electronics recorded year on year inflation this month, for the first time since the SPI began in 2006. However, a sharp increase in promotional activity, in order to clear stock, pushed both Clothing and Furniture further into deflation.
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“This month’s figures only serve to illustrate the enormous challenges of the current environment,” continued Dickinson. “And while retailers are doing their best to provide value to keep prices low for consumers who are feeling the pinch of falling real wages, in an industry where margins are already low, the capacity to absorb further cost increases is wearing thin.

“That’s a particular concern as retailers face paying an additional £270m in business rates next year.”

The BRC says it is urging the Chancellor to take the opportunity in his budget this month to freeze rates in order to “encourage investment, to safeguard shops in economically vulnerable communities and to enable retailers to keep prices low for the UK’s households”.

In September, the Office for National Statistics (ONS) confirmed the Retail Price Index (RPI) at 3.9%. This means a £1.1 billion increase in business rates from April 2018. According to the BBC, that’s an increase of £270 million to UK retailers.

Last week, the BRC and the Assoc. of Licensed Multiple Retailers wrote to the chancellor, Philip Hammond, calling for support in the upcoming budget head of the projected business rates increase.

“Our members, representing diverse sections of the economy, firmly believe that an increase in excess of £1 billion is unsustainable and will only compound the negatives of the existing system,” reads the letter. “Let there be no doubt, this sharp increase will have a negative impact on business investment.”

The BRC and the Assoc. of Licensed Multiple Retailers also called the current system “broken and at a tipping point”, asking the chancellor to consider working with them to improve the system in the longer term.

You can read the letter in full here.

Tags: Retail , brc , ONS , Nielsen , chancellor , business rates , shop price index

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