Boris Johnson fired up the market for British retailers, promising to review business rates with a view to easing the taxes that companies pay for the buildings they occupy if he is elected as Prime Minister in December.
The “relief rally” came after a nightmare year on the high street, with big names such as Mothercare PLC (LON:MTC) most recently though to fashion retailer Monsoon going bust in the past year as online shops continue to rack up sales to the detriment of bricks and mortar.
In a speech at a CBI conference on Monday, Johnson said that a Conservative government would cut business rates, launching a fundamental review at their first budget, along with a raft of measures expected to bring a “billion-pound boost” to business.
Furthermore, the party have also said they will increase the structures and buildings allowance (SBA) from 2% to 3% to relieve taxes on the purchase, leasing, and construction of buildings such as supermarkets and high street shops, as well as an increase in relief to National Insurance contributions paid by employers on behalf of employees.
Federation of Small Businesses (FSB) national chairman Mike Cherry, welcomed the proposals on business rates, which “should remove small businesses from the burden of an outdated, regressive tax that charges small firms before they make £1 in profit, let alone £1 in turnover”.
But Helen Dickinson, chief executive of the British Retail Consortium (BRC), said that the cuts don’t go far enough to fix our “broken” business rates system.
Business rates pulled in £24bn in the last tax year.
Despite retail only accounting for 5% of the UK economy, it pays 25% of all business rates.
The offer to cut business rates for SMEs is “welcome,” but “will not slow the decline in high streets that has seen many household names disappear in recent years”, said Dickinson, particularly as the “majority of the UK's 3 million retail workers are employed in businesses that will not benefit from the Conservatives’ proposed rates cuts”.
She added that the next government “should reduce the tax burden further” with freezes next year’s rates increase, and relief to encourage investment in our high streets.
The last angry instalment came in August, when the BRC of major UK retailers, including Marks & Spencer PLC (LON:MKS), Greggs PLC (LON:GRG), and Morrison Supermarkets PLC (LON:MRW) demanded the government freeze business rates to fortify the high street against collapse.
In a letter to the chancellor, Sajid Javid, the bosses called for an urgent reform of the system, which they said “holds back investment and accelerates job losses and store closures across the country”.
The outcry has been ramping up since 2017 when the government re-evaluated business rates, sending the tax surging in areas such as London, where property values had risen.
As for the likelihood that the measures will see the light of day in parliament, polling data from last week suggests an increasing likelihood of a Conservative majority, with the probability now above 60%.
Russ Mould, the investment director at AJ Bell, said that a conservative majority Government is “generally perceived to be positive” for UK stocks short-term, since a win from the opposition party Labour could see several sectors renationalised and taxes reformed.
“At the moment it seems like the market is pricing in a Tory victory, thus investors are hoping that increased positions in UK stocks will put them in a good place to enjoy a bounce on the election result,” added Mould.
Politics continues to dominate the markets, as the major parties gear up to publish their election manifestos, while the first televised leaders’ debate between Boris Johnson and Labour’s Jeremy Corbyn due tomorrow evening.