Tesco chief says business rates largely to blame for retailers' demise

Tesco chief executive Dave Lewis. Pic: PA.
Tesco chief executive Dave Lewis. Pic: PA.

The head of the UK's biggest supermarket has said business rates have played a "large part" in the demise of some retailers.

Tesco chief executive Dave Lewis suggested the current rates regime had created an "uneven playing field" that is putting traditional retailers at a punitive disadvantage.

With the tax costing the supermarket giant more than £700million a year, he said a balance needs to be struck between the digital and traditional worlds of retail.

He made the comments to the BBC as workers and shoppers reeled from the news that House of Fraser is planning to shut 31 outlets, putting 6,000 jobs at risk.

The closures, which account for more than half of the chain's 59-store estate across the UK, are the latest in a raft of similar measures taken by companies as they struggle with rising business rates, labour costs, competition from online rivals and a slowdown in consumer spending.

Labour has accused the Government of presiding over "high street annihilation", with failing to ensure a fair business rates system partly to blame.

Ms Lewis asked: "Are we allowing it to stay competitive, or are we by stealth lowering corporation tax and increasing business rates to a place which is creating an uneven playing field and forcing people to think about how it is they avoid that cost and find other routes to the market?"

He is the latest boss of Britain's so-called Big Four supermarkets to criticise the current rates system.

The chief executive of Sainsbury's, Mike Coupe, described it as "archaic" and called for "fundamental reforms" in comments made in 2017.

The chain, which announced in April that it was seeking to merge with Asda, was expecting to pay around £500million in rates last year.

Critics of rate revaluations introduced in 2017 say online retailers such as Amazon benefit as their out-of-town warehouses are worth less than high street property.

Traditional retailers were forced to stump up billions as their bills surged on the back of property value increases.

According to an estimate by rates specialist CVS, businesses in England and Wales are bracing themselves for a £1.2billion tax hike next year, while a large number of companies are being dragged to court for failing to keep up with climbing payments.

The Governor of the Bank of England, Mark Carney, weighed into the debate in May, saying it had become a "real issue" for retailers across the country.

As well as the bosses of what could soon be Britain's two largest supermarkets, a series of major retailers have warned of the impact rates are having.

Pizza Express has blamed business rates, rents and rising food prices for a fall in earnings last year, while the upmarket deli chain Carluccio's unveiled a restructuring plan, citing the tax among its reasons for doing so.

On the eve of House of Fraser's announcement, Labour's shadow business secretary, Rebecca Long-Bailey accused the Government of presiding over a "recipe for complete high street annihilation".

She told the Commons retail firms were coming under increasing pressure and in the first three months of 2018, 21,000 jobs in the sector were at risk.

Business Secretary Greg Clark said the loss of stores was "by no means new in British retailing".

He cited now-defunct stores Woolworths and Toys R Us as "disruptors and insurgents" in their day.

"This is a story of constant change in the retail sector," Mr Clark said.