UK beauty retailers warn of shop closures if government doesn’t cut business rates

Leading British retailers have called on the UK government to help their bottom line by cutting business rates by 20%. Over 70 retail CEOs wrote a letter pleading for the government to “level the playing field” for retail properties. The British Retail Consortium tells Personal Care Insights that it is essential to assist UK retailers since the region has been losing 1,000 shops a year. 

The council said without action, another 17,000 shops could close over the next decade. The so-called Retail Rates Corrector works to “stem this tide of shop closures and unlock new investment in jobs, shops and communities.” 

The letter, addressed to Chancellor Rachel Reeves MP, aims to fight the “imbalance” whereby the retail industry pays 7.4% of all business taxes, £33 billion (US$43.03 billion), a share 1.5 times greater than its share of the overall economy (5% GDP).

Helen Dickinson, chief executive of the British Retail Consortium explains how “retail has been the golden goose, generating tax revenues far beyond the industry’s size, but the current situation is not sustainable.”

“The government should act to rebalance the system and ensure all industries are paying their fair share. This, in turn, would drive increased retail investment in people, places and communities. The Budget is the perfect opportunity to lay the groundwork for local investment that delivers for retail customers, its employees and the economy.”

According to The British Beauty Council, the beauty and personal care sector contributed £13.5 billion (US$17.6) to the UK’s GDP last year, accounting for 0.5% of the nation’s total economic returns.

Inflation boom and bust

The British Retail Consortium says the current tax burden holds back investment in people and places — directly affecting the three million people employed by the industry and the 2.7 million additional people employed within the supply chain. 

Personal Care Insights has reported on the impact inflation has on consumers and retailers in the beauty sector, including a report by the British Beauty Council and Oxford Economics that showed the UK beauty sector is actually returning to its 2019 peak economically, despite structural and economic challenges. The data suggested that the industry’s direct contributions increased by 11% in 2023, or 3%, after adjusting for inflation.

Businesses as for lower retail tax rates while consumers are shown to spend their disposable income on beauty and skin care products.While higher inflation has had adverse impacts, it has also contributed to sector growth. Various data suggest inflation is starting to cool, but Oxford Economics still sees growth of 3% next year — higher than the 1% average for the overall UK economy.

It seems many UK consumers are also finding ways to cope with higher inflation, spending more of their disposable income on self-care and beauty.

Moneyboat, a short-term direct lender offering loans, said 35% of the population dedicates extra funds to beauty products, exercise and other self-care activities. The survey suggested that 20% of Brits spend most of their disposable income on beauty products. 

Plugging financial holes

Last month, the UK’s official forecaster warned that public debt will nearly triple to over 270% of GDP in 50 years.

The report cited increasing debt levels that affect all developed economies, which are struggling to cope with competing demands on government funds during fiscal unrest.

The newly elected Labour Party pledged to reform the business rates system to boost shopping culture in England. It said the current system disincentivized investment, created uncertainty and placed an “undue burden on [the] high streets.”

When previously asked about the prospect of Reeves changing financial rules, a Treasury spokesperson said, “The chancellor has vowed to lead the most pro-growth, pro-business Treasury in the country’s history.”

“Early action has already been taken to unlock investment to advance our national mission of growth. The government’s manifesto committed to a fairer business rates system which levels the playing field between the high street and online giants, incentivizes investment, tackles empty properties and supports entrepreneurship.”

However, the Labour party has not outlined what the change will look like. The former Conservative government aimed to reform business rates but failed to implement change.