ALEX BRUMMER: Easy for failed firms to blame business rates

When Gap arrived on these shores in 1987, its collections of hoodies, t-shirts, denims and chinos were a real threat to staid Marks & Spencer. 

Gap experienced explosive growth and it stores became a staple of the High Street and shopping centres. Gap Kids brought a whole new informality to next-generation clothing. 

It should have been a big winner from lockdown, given an online presence. Specialisation in leisure clothes ought to have matched the pandemic narrative. 

Gap in the market: When Gap arrived on these shores in 1987, its collections of hoodies, t-shirts, denims and chinos were a real threat to staid Marks & Spencer

The management decision to close all its stores came as a shock this week to staff, customers and landlords alike. 

Property owners are never popular and the UK model of upward-only rent reviews, irrespective of prevailing economic conditions, is troublesome. It was among the factors which caused the demise of all the Arcadia brands, killed off Debenhams and contributed to store closures by Marks & Spencer and House of Fraser, both of which needed to update their High Street presence. 

Covid has brought rents down to earth with a bump. 

The derelict look on the High Street and in the shopping centres is not a good one. Landlords are adjusting with rent abatement and moving towards the American model of relating rents to turnover. 

Struggling retailers blame external conditions for their troubles. Property specialists Colliers points out that as rentals come down, they are increasingly divorced from business rates. 

Gap had a business rates bill of £500,000 a year at each of its prestige stores at Westfield in west London and Canary Wharf. That’s a lot of hoodies. 

The end of the 100 per cent business rates holiday for larger retail and leisure companies from July 1 is damaging. Smaller shopping firms will still receive up to two-thirds relief. What is plain is that the whole business rates system needs overhauling now that rents and property values have tumbled. The current levies are an anachronism and the long-awaited government review needs speeding up. 

It is easy for failed shopping firms to blame business rates for their troubles. Debenhams was a victim of private equity ownership. Topshop and Gap, having been wildly fashionable at their peak, lost touch with their core market. 

For every chain that has suffered, there are others that have not just survived Covid but have thrived. 

Primark, with no online sales presence, came roaring back from lockdown with third quarter sales of £1.6billion, double the level the year when stores were shuttered. The company boasts that its low cost model is enjoying its best days ever. 

At the posh end of the market, Burberry may be rudderless, with the loss of inspiring leader Marco Gobbetti, but same stores sales are sharply up this year. JD Sports struggles with governance, but its capture of the sportswear zeitgeist means it is booming. Simon Wolfson at Next demonstrates it is possible to run a resilient digital and bricks-and-mortar enterprise in tandem. 

Business rates must be reformed and become relevant again. But there is no substitute in fashion retailing for knowing your market, investing in the product and technology and smart management.

Home grown 

Wise could be dismissed as a modern day Western Union, providing cash repatriation services to immigrants, expatriates and the 5m or so EU citizens with UK settled status. 

By embracing technology, it has dramatically lowered the cost of money transfers and speeded up payments. 

It has removed the unknown from bank transfers by eschewing the turn on the exchange rate. 

The planned market introduction on July 7 will put it close to the top of valuations for fintech in the UK. Among the risks is that its regulatory-light model could make it vulnerable to money laundering at a time when banks have woken up to the threat and have imposed tough rules. 

As with other recent floats, the founders have chosen a dual shareholder structure. They will control 40.75 per cent of the votes with 26.8 per cent beneficial ownership. Advocates of enhancing the UK’s presence in the market for initial public offerings, such as Lord Hill, see this as a necessary price for strengthening the City post-pandemic. 

It will keep Wise out of the main indexes, which could have negative impact on valuation. Personally, I find the presence of Baillie Gifford, among the early investors, reassuring. The Edinburgh fund manager has shown rare skill in picking tech winners.