The British Retail Consortium reports that the UK had the worst retail sales figures in ten years. This can only be bad news for our, already struggling, high streets. We previously explained the current Chancellor’s plans for increased tax on online retailers – dubbed the Amazon tax. Labour are now saying that they may get behind such a proposal in order to try and help save our high streets in the long term.
Don’t people spend loads at Christmas?
A big Christmas spend is a mainstay of the retail sector’s financial year. Many businesses rely on the additional Christmas income to balance out quiet times in the rest of the year. Unfortunately this year, even with reduced prices before the big day, takings did not match expectations. Did you spend as much as you normally do?
Helen Dickenson , the chief executive of the British Retail Consortium, told the BBC: “Squeezed consumers chose not to splash out this Christmas, with retail sales growth stalling for the first time in 28 months. The worst December sales performance in 10 years means a challenging start to 2019 for retailers, with business rates set to rise once again this year, and the threat of a no-deal Brexit looming ever larger.”
Businesses are trying to tackle many different changes simultaneously. Helen Dickenson said: “Retailers are facing up to this challenge, but are having to wrestle with mounting costs from a succession of government policies – from the apprenticeship levy, to higher wage costs, to rising business rates.”
How might this affect the high street?
In a nutshell, more shops will close, leading to empty high streets and more limited shopping experiences. This is not a good way for our villages, towns and cities to be heading.
According to The Sunday Times, “…more than 20 struggling high street chains instructed Deloitte to assess whether they are eligible for debt restructuring in the past two months alone.” One option is a company voluntary arrangement (CVA) to close shops without having to honour the terms of their lease and continue to trade. Obviously, this leaves the landlords of those properties in the lurch.
For example, last year Byron Hamburgers, Carluccio’s, Jamie’s Italian and Prezzo all had to use CVAs. It looks like Pizza Express may follow this year. All names we know and would like to keep on our local high streets.
Why does Labour back a possible Amazon Tax?
Rebecca Long-Bailey, Labour’s shadow business secretary, discussed her party’s position on an Amazon Tax in a recent interview with The Independent. “We are looking at all the options that are available at the moment and it’s about getting something that’s fair, because at the moment we don’t have a fair taxation landscape between online and physical retailers. But it’s a very difficult circle to square.”
Online retailers pay less tax because they are not paying business rates on their premises. They work from warehouses, rather than actual shops visited by their customers. It’s simple maths. If your retail business is online you have fewer outgoings and a smaller tax burden. Particularly when you can legally manipulate the origin of your sales to also avoid paying your full UK tax bill.
She recognises the complexity of the situation: “It’s not a case of black and white, ‘right, well, let’s tax online and give tax reliefs to high street retailers’, because I don’t think that’s fair either and that’s why there’s been such a long discussion in parliament about the best way forward for this.”
Protecting our high streets is high on her personal agenda, as she explains: “I think to lose the high street would be very, very damaging for Britain and I think people are very angry about what they are seeing. It’s not just about encouraging people to shop local and I would encourage that, but I think we need to look at the other things we can do to revitalise the high street as well and that will require government direction and it will require investment.”
One of Labour’s suggested proposals includes a statutory empty property register to be written and maintained by local councils. The idea of this would be to have councils and landlords working together to maximise the usage of the available property space.
So Labour and the current government seem to be in some agreement that a review of the taxation of digital retailers is at least part of the plan to revitalise our struggling, but much loved, high streets.