“It’s a double crime because we are letting online businesses like SAos and Boohoo ‘out-compete’ rivals by not paying as much tax – and when they kill competitors and creditors, which includes HMRC, pick up the tab too,” said former Sainsbury’s chief executive Justin King, who now sits on the board of Marks and Spencers. “It would be funny if it wasn’t so serious.”
But the problems aren’t just the High Streets, the rIpple effect for the Chancellor is a bit frightening too.
Under Pressure Rishi
With shops closed in Lockdown, Chancellor Rishi Sunak is under pressure to extend a 12 month moratorium on business rates. Former BBC Dragon’s Den star Theo Paphitis has said he would be forced to shut 80 of the stationer Ryman’s 200 outlets if rates were bought back in March, which is now only 28 days away.
When a shop becomes vacant, no rates are collected for the first three months but the landlord becomes liable after that – a system that the British Property Federation says is “fundamentally unfair” given shortfalls in rent collection and an increase in refusal during the pandemic.
But ASOS Chairman Brian McBride disagrees. “Arcadia and Debenhams didn’t die because of taxes, they died because they had bust business models and at times were incompetently run. People are shopping differently: giving out tax breaks is not the answer .” He also added that online retailers had driven down prices and widened consumer choice. The last part being a very valid argument, but when you become the only player in the game, that argument will not hold water for much longer.
It seems inevitable that the Government will have to implement a much fairer playing field, and judging by the speed at which things have happened in the last year, don’t be surprised if their is an announcement of the first stages of levelling the playing field for online businesses in the Budget in March.
But at this time, it will only be a sticking plaster for a system that is broken on a much deeper level. All the big brands have tried their hardest to undermine the systems and tax payable, because they call that, ‘doing business’., so whilst many are crying in their Starbucks this morning, they are as much to blame at the demise of our High Streets as the online retailers.
But there is hope. As reported last week, these brand purchases have squeezed the middle economy and that means that there are opportunities for businesses to get into that space. Despite the pandemic there is a section of society that is crying out for a modern, exciting and lean retailer that puts customers first. One of the contributing factors to all the retailers collapsing is that they believed their own hype, when in actual fact they had lost the support and passion of their customers.
There will be deals to be done. There are spaces opening up. (No-ones even asked the Landlords yet.) There are customers waiting. Risky yes. Brave, certainly.