Feb 18, 2020
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Shoe Zone warns of possible store closures, business rates are to blame

Feb 18, 2020

Few days seem to go by at present without another retailer warning on the viability of some of its stores and the latest to do so is budget footwear retailer Shoe Zone

Shoe Zone

The company has said that it could close as many as 100 of its shops if business rates in the UK aren't overhauled. 

In an interview for the BBC Wake Up To Money show, company chief Anthony Smith said that business rates are the fundamental problem for the firm and are holding back physical retail and the regeneration of high streets in Britain.

Smith said that around a fifth of the firm’s stores are at risk without business rates reform and that the company will look at them on a case by case basis. "It's a simple maths question,” he said. “Every time a lease comes up, we'll look at the mathematics of it. If we are not making any money out of it... the shop will unfortunately close”.

And he added that “if people want vibrant high streets, they really do need retailers like us to keep our shops open in smaller towns”.

Business rates are property taxes that relate to the overall value of the property the retailer occupies. They've been criticised for years as putting an unfair burden on physical stores compared to those who sell online and also for penalising the retail sector in particular compared to other businesses in the country.

But a particularly big issue with business rates at present isn’t just that they’re seen as soo high, it’s that a system called transitional relief is causing extra pain. Originally introduced at a time when rents were almost universally rising, transitional relief phases in an increase in business rates (which a retailer would normally have to pay as property values rise) over a period of years. But that concession is balanced by any business rate reduction that tenants in stores where rents are going down should receive also being phased in over several years. 

Now that rent rises are a thing of the past in so many areas, it means retailers seeing lower footfall and negotiating lower rents are still paying hefty rates bills. Failed Beales, for instance, was estimated to have paid over £1m more than it should have done before it went under.

Shoe Zone’s Smith said that “there is a lot of talk about the regeneration and repurposing of town centres, which we are all up for. But whatever goes into those shops, the rateable value is still simply too high.”

However, while a large chunk of its store could close, he also said that sales online and in the out-of-town stores that it has been opening in recent periods were "going well".

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