Rumours that Debenhams may be set to give councils an ultimatum in a bid to secure business rates cuts (as reported by Sky News) or it will shut stores in particular areas, could well misfire as the beleaguered department store would be aiming for the wrong target, says John Webber, Head of Business Rates at Colliers International.
“Whilst we have sympathy for Debenhams, as we do for any other retailer paying an effective 50% tax, it’s important to remember that in any discussion about business rates:
- If the Local Authority allows Debenhams off its rates bill- it would have to let other retailers off too which would be unsustainable in the current marketplace.
- Even if the Local Authority wanted to do this, this would breach State Aid Rules, which only allows a limited amount of help to a company of a certain size.
- Local Government would not be able to afford to give this sort of rates reduction given the state of local finances.
- The billing authority is a collection agency and the 50% multiplier which is the cause of many retailers’ financial woes is set by Central Government. The local authorities do not set business rates.
Webber continued, “Debenhams would be better to lobby the Government to reform the system, reduce the multiplier to a manageable tax, abolish phased downwards transition following any Revaluation and broaden the burden of this tax from the retail sector.”
“Instead of darkening the doors of town halls up and down the country they should be knocking on the door of Number 10 where the magic money tree seems to be alive and kicking.”
Debenham is reported to have plans to close 28 more shops by 2022, leaving about 100 open. It has already closed 22.
Debenhams' rates bill is reported to be around £70 million following a number of store closures in the past year.