The chief executive of high street chains Monsoon and Accessorize has cautioned that business is at a “tipping point” as Labour’s imposed costs risk sending jobs and investment into reverse.
Nick Stowe said the company behind the two brands had already cut the number of new stores it is investing in this year to 10, from 25 last year.
In a Daily Mail column, Stowe explained: “It’s because rising costs mean the investment case doesn’t add up.”
The remarks follow Labour’s increase of employer national insurance contributions and the minimum wage, together with a flawed overhaul of business rates. Companies are additionally confronting a steep jump in energy costs.
“Retailers are not asking to be insulated from every increase in the cost of doing business. We have already weathered significant shocks and cost increases, and are paying more tax than ever.”
“But Government does need to recognise the cumulative impact its decisions have on whether businesses invest and hire and recognise when those decisions reach a tipping point and employment and investment goes into reverse. We’re at that point.”
These statements arrive after the British Retail Consortium released data last week indicating a decline in consumer confidence, a trend that is likely to heighten strain on high streets.
Retailers Cut New Store Plans
In another development, a Confederation of British Industry poll found that ongoing sales weakness has led retailers to reduce order quantities at the quickest rate ever recorded since the survey started in 1983.
Stowe appealed to Chancellor John Healey to employ the upcoming Budget to scrap the planned business-rate increase for the following year. He also reiterated industry-wide pleas to protect big shops from a revamp of the rates regime intended to equalise brick-and-mortar retailers with their e-commerce competitors.
There is concern that a reform aimed at big premises – intended to hit massive distribution centres such as those operated by Amazon – might unintentionally harm large ‘anchor’ retailers.
Stowe emphasized, “Larger stores are significant investments in town and city centres, they are the anchors around which other retailers build their businesses.”
“Making them disproportionately more expensive risks discouraging exactly the kind of investment Government says it wants and threatens the core of our high streets.”
The statement follows remarks from the heads of Kingfisher, which owns B&Q, and the John Lewis department-store group, who similarly asked Labour not to single out big stores.
Business Rate Reform Worries
Mike Ashley, the Frasers Group billionaire, declared that the Government would be “simply delusional” to place additional strain on large retailers.
Retailers have already shouldered £6.5 billion in additional employment costs over the past two years, alongside rising energy bills and spiralling transport costs. With business rates rising as well, the cumulative cost burden is becoming unmanageable.
At the same time, customers are becoming more cautious. Confidence in the economy fell six points in September, with people more pessimistic about their own finances and expecting to spend less as a result. As spending declines while costs increase, retailers are squeezed even harder.
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Business rates are particularly difficult because they are a fixed tax on having a physical presence. Whether a store is thriving or struggling, the bill still needs to be paid.
Rates are also set centrally, so mayors and local authorities have no say in the level of tax, and no way to encourage businesses into their area to support jobs and redevelopment.
What can be done now? Most important: stop the situation from getting worse. The Chancellor should cancel next year’s inflation-linked increase and freeze the business rates multiplier, ensuring no shop sees its bill rise in April simply because of inflation.
We are already seeing what happens when costs become too difficult to absorb. Retail has lost 122,000 jobs in just two years, while the number of part-time retail jobs is now at its lowest level on record.
Costs Outweigh Revenue
That reform must reduce the overall burden without leaving individual stores paying more as a result.
Stowe noted that the cumulative cost burden is becoming unmanageable. Firms have already shouldered billions in extra employment costs. Rising energy bills and transport costs add to the pressure. Business rates are also climbing higher.
The cost of running a store is rising sharply. The calculation for opening new locations is becoming more difficult. Retailers are now rejecting more sites than they are moving forward with.
Monsoon and Accessorize have cut their investment plans. The company invested in twenty-five new stores last year. This year, the plan was reduced to just ten stores.
This decision is not due to a lack of capital. The company wants to keep investing in physical retail. They believe in the high street and know that it benefits everyone. However, the numbers must add up for every new opening.
Consumers are becoming more cautious with their spending. Latest figures from the British Retail Consortium show consumer confidence weakening. The confidence in the economy fell by six points in September.
People are more pessimistic about their own finances. They expect to spend less money in the coming months. As spending declines, retailers face a squeeze. The gap between rising costs and falling revenue is widening.
A store must pay the bill regardless of whether it is thriving or struggling. The rates are also set centrally, meaning local leaders have no control over the level of tax.
Government Must Act in Budget
Andy Burnham has made reviving Britain’s high streets a priority. He wants to breathe new life into these communities. Retailers are ready to invest and create good jobs across the country.
However, ambition alone is not enough. The Government must prove it is committed to providing breathing room. Next month’s Budget is the moment for the Chancellor to show this commitment.
Proposed Solutions to Alleviate Retail Sector Pressures
To address the mounting challenges, immediate actions are suggested. The Chancellor is urged to cancel the upcoming inflation-linked business rate increase and freeze the rates multiplier, preventing automatic bill hikes in April. Additionally, removing shops from the higher multiplier is proposed to reduce tax burdens.
These measures aim to protect larger stores, which serve as vital investments in town and city centers, supporting surrounding businesses. Without intervention, rising costs risk deterring essential investments and undermining high street stability.
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