Business rates rise could see more than 100 supermarkets at risk

More than 100 large UK supermarkets could reportedly face closure under government plans to raise business rates for the most valuable retail properties, according to the Financial Times.

It learnt that the proposed changes, due to be announced in the autumn Budget, could increase rates for premises with a rateable value above £500,000, affecting the top 1% of retail stores, to fund the permanent extension of a discount for smaller retailers and hospitality businesses.

It said that industry insiders claimed roughly 50 of Sainsbury’s 600 supermarkets would become unprofitable under the measures. 

Similarly for Tesco, the UK’s largest private sector employer, said the move would push “tens of its stores into the red”.

However, the outlet warned that Asda and Morrisons are expected to be “more exposed”. It stated that the viability of 30 Morrisons sites, out of almost 500, would be threatened, while a person familiar with Asda said almost 90% of its roughly 600 supermarkets would be affected.

In contrast, the FT stated that reforms would largely spare Aldi and Lidl, which tend to operate smaller, lower-value stores. 

Property consultancy Colliers told the FT that it estimates less than 10% of Lidl sites would be caught by the higher charges.

Overall, the UK supermarket sector employs 2.8 million people and has faced rising costs from increases in employers’ national insurance contributions and the minimum wage. 

Large supermarkets, which employ one in three retail workers, have long argued that the property-based tax puts them at a disadvantage compared with online competitors.

However, the Treasury said: “We are creating a fairer business rates system to protect the high street, support investment and level the playing field. We intend to introduce permanently lower tax rates for retail, hospitality and leisure properties from next year. Unlike the current relief for these properties, there will be no cash cap on the new lower tax rates.”