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Ahead of Dame Sharon White’s first day as Chair at John Lewis this week, why the Retailer also needs to join the call for Business Rates reform

03 02 20 rating

High Business Rates Adding to Pressures on Costs at John Lewis Department Stores Says Colliers- 21 department stores have bills of over £1 million each.


As Dame Sharon White prepares for her first day at John Lewis on Wednesday, there is no doubt the retailer is under some pressure. Negative news emanating recently, including high profile departures from its senior management team and another big fall in profits- following a 2% decline in sales, illustrate how even blue-chip retailers are facing the heat in current market conditions.

Dame Sharon will definitely have to look more closely at costs.

And there is no doubt that current business rates regime is adding to the pressure, says John Webber, Head of Business Rates at Colliers International.

Analysing John Lewis stores in the UK, Colliers estimates that the department store business (not including Waitrose) faced a business rates bill of around £57.4 million in the current year- more than 30% higher than before the 2017 Revaluation. This is due to rise further to £59 million next year- a big bill for a department store chain of less than 50 shops.

And some stores are facing enormous bills. John Lewis, Cavendish Square off Oxford Street, for example alone is facing a business rates bill of around £10.4 million this year. And Colliers has found that 20 other John Lewis department stores are paying rates bills of more than £1 million each in the 2019/20 tax year. These include: Bristol, Reading, Cambridge, High Wycombe, Peterborough, Southampton, Blue Water, Nottingham, Manchester, Cheadle, Liverpool, Newcastle, Birmingham, Solihull, Leeds, Brent Cross, Kingston, Westfield, Milton Keynes and Cardiff. Such bills are due to rise further in 2020.2021 and are looking increasingly unsustainable in the current climate.

According to John Webber, “The increasing shift to on-line shopping, rising costs, including the rise in the minimum wage and dampened consumer confidence are all taking their toll on traditional department stores and John Lewis is no exception. We understand it is looking closely at its management layers, its annual bonuses, its Christmas advertising spend and its position with its various landlords.  With such a drop in sales, it is no wonder the company is needing to take defensive measures.”

But,” as Webber continued “the business rates environment needs to be overcome also.” 

“Whilst John Lewis is currently negotiating with landlords over the rents and even the service charges that it pays, one area of costs- business rates- is set in stone – and there is no room for manoeuvre. And bills are likely to continue to rise over next year too.”

Of course, with 2021 Revaluation around the corner, John Lewis should get some reprieve in 2021/2 since rate bills should reflect the reduction in retail rental levels, as seen at April 2019. But as Webber points out, this would only kick in if the Government allows values to move to their correct levels immediately and does not implement a period of transition, as it did so disastrously after the 2017 revaluation.

John Webber continued, “Like other retail operations, John Lewis is facing rising costs which it is attempting to keep under control in a difficult market. Business rates are playing their part in keeping such costs high. It would be massively disappointing if the Government shows it has learnt nothing from the current retail predicament and goes down the downward transition route as it did at the last Revaluation. We need to allow retailers such as John Lewis a chance to ease their rates burdens immediately. Dame Sharon should join in the campaign to make sure this happens.”

“Sadly, given recent announcements designed to help smaller retailers no one in power seems to appreciate that it is the bigger retailers, the chains that are the big employers in the sector. Maintaining a punitive tax system against the bigger retail players whilst providing relief for the smaller retailers, does little to prevent store closures and job losses as we have seen elsewhere in the market.  When quality retailers like John Lewis start to feel the pinch, we know we are really in trouble.” 

In January the British Retail Consortium reported 2019 to be the "worst year on record” for the retail sector.

 

Related Experts

John Webber

Head of Rating

Rating

Birmingham

I have over 30 years’ experience in the rating industry and lead a 90 plus rating team at Colliers International.  When I took over responsibility for the team in 2005, it consisted of only a dozen people and has now grown into one of the leading rating advisory teams in the country.  I am a member of Colliers International Management Executive as well as sitting on the company’s promotion panel. 

I am regularly called upon by the national media to give my views on a range of business rates issues and I am vocal commentator on the 2017 Revaluation.

I started my career in the Valuation Office Agency in Kidderminster.  I joined Gerald Eve in 2000 where I spent 10 years before moving to Gooch Webster (now Colliers International). I sit on the National Retail Panel of Rating Surveyors Association which provides guidance on how the RSA town committees work with the VOA and valuation matters.  John sits on the RICS Rating Diploma Committee having passed the prestigious qualification in 2014.

Philip Harrison and I founded 'Accurates' in 2007, the Collier's Compliance and Audit team, which although forms an integral part of the Rating Team is now a leading brand in its own right.

View expert

Hannah Zitren

Associate Director

Marketing & Communications

Manchester

I am responsible for media relations and generating coverage in top tier broadcast and print media. I work across a range of Colliers’ UK & Pan-EMEA business lines advising on their strategic and tactical PR needs.

My role includes:

·         Developing and executing PR plans for the various business lines to help promote their key messages across all aspects of the media - print, broadcast and social.

·          Media evaluation and reporting objectives, targets and successes across the business.

·         Reputation management and crisis management.

·         Media training.

·         Media engagement: setting up meetings with top tier media and various internal spokespeople to continuously expand and build a presence with property and vertical media network.

·         Consistently delivering service excellence, meeting with business heads of a regular basis and trying to influence the research as much as possible to ensure our content has a strong enough news hook.

·         Key campaigns that I work on include MIPIM; MAPIC; REVO; Midsummer Retail Report; IHIF; Cities of Influence in addition to a host of all alternative property sector research reports.

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