Business rates relief ‘near worthless’ for big retailers, says Frasers

Mike Ashley’s Frasers Group has lashed out at the UK Budget, arguing that a cap on business rates relief will make it “nearly impossible” for the retailer to rescue the Debenhams stores that it had been circling.

Chancellor Rishi Sunak this week announced that business rates would remain discounted by two-thirds for the remainder of the year, although the relief would be capped at £2m for closed businesses.

Frasers, which owns the Sports Direct and Evans Cycles chains, on Friday said the cap made the support package “near worthless” for large retailers and warned of potential store closures and job cuts as a result.

In a statement to the market the company called the decision “a disappointment”, adding that the retail industry had “repeatedly asked for structural reform of business rates [but] none has been forthcoming”.

Sunak has promised to “level the playing field” between online retailers and the high street but last month delayed the conclusion of a business rates review, which is considering the case for an online sales tax, until the autumn.

The business rates system, a tax on the occupancy of properties used for commercial purposes, would in a normal year raise about £25bn in England.

Real estate adviser Altus Group expects the government to raise just under £19bn in the financial year ending 2022, up nearly £4bn on the year before. It estimates that the extension to the business rates holiday, which some essential retailers have opted out of in order to pay dividends, will cost the government £3bn.

Altus estimates that the business rates relief will have saved Frasers roughly £91.2m in England and Wales in the financial year to March 31. 

Ashley’s group has been circling some of the stores set to be vacated by Debenhams once it is wound up. The 200-year-old brand was earlier this year acquired by online-only retailer Boohoo, which had no use of Debenhams’ 118 department stores and did not form part of the £55m deal.

Frasers said the cap on the extended rates holiday would make it “nearly impossible to take on ex-Debenhams sites with the inherent jobs created”. It added that the company would be forced to review its portfolio to identify stores “that are unviable due to unrealistic business rates”.

Last week, the group warned of an expected impairment charge of more than £100m as lockdown restrictions on high streets drag on, with non-essential retailers having to wait at least until April 12 before they can reopen.

Frasers had been expecting an increase in underlying profit for the year to April of between 20 and 30 per cent, but withdrew the forecast in December when the latest lockdown was announced.

The group’s online sales have grown strongly during previous lockdowns, but not by enough to offset the decline in store revenues. At its Sports Direct chain, total sales fell almost 10 per cent during the first half of last year.