- Supermarkets face closures due to business rate hike
- Government plans threaten large-format stores in UK
UK grocery sector is facing a significant shake-up as more than 100 large-format stores operated by leading supermarket chains risk closure due to impending government plans to increase business rates on properties with a rateable value above £500,000.
As reported in Financial Times today (Aug 14), about 50 of Sainsbury’s 600 supermarket outlets will become unprofitable as a result of the higher property charges, according to people in the industry.
For Tesco, the changes would tip tens of stores into the red, according to a senior figure at the company.
The changes will threaten the viability of 30 Morrisons supermarkets, out of a total of almost 500, though it not necessarily mean those outlets will be closed as a result.
Meanwhile, almost 90 per cent of Asda’s roughly 600 supermarkets would be affected by the business rate increases, said a person familiar with the company.
According to Property experts at Colliers, less than 10 per cent of Lidl’s stores will be impacted by the proposed changes. The changes in business rates rise do not largely impact Aldi and Lidl, which typically trade from smaller stores.
It comes as the government is planning to raise business rates on properties with a rateable value of more than £500,000 next year, which will help fund a discount on smaller retail and hospitality outlets.
The government, which has pledged to fundamentally reform the business rates system, contends that its proposals will increase the business rates take from the majority of the distribution centres used by “online giants” such as Amazon. Industry lobby groups argue the government’s focus on large stores will penalise supermarkets and department stores.
“We are creating a fairer business rates system to protect the high street, support investment and level the playing field,” the Treasury said.
“We intend to introduce permanently lower tax rates for retail, hospitality, and leisure properties from next year. Unlike the current relief for these properties, there will be no cash cap on the new lower tax rates.”