John Lewis Partnership’s boss warned consumer confidence was fragile as he blamed Rachel Reeves’s tax hikes for the company’s £88million losses – ahead of figures revealing the UK economy is flatlining. His warning yesterday was given resonance by new figures from the ONS today revealing that Britain had zero GDP growth in July. The department store and Waitrose owner’s pre-tax losses in the six months to July 26 widened from £30million over the same period last year.
JLP has been hit with rising costs in the wake of last year’s Budget, including £29million from a new packaging levy and higher National Insurance Contributions. The packaging tax, or ‘extended producer responsibility’, has shifted the cost of recycling from councils to companies, hitting food retailers particularly hard. JLP chairman Jason Tarry said he was among those at a meeting at Number 11 with the Chancellor last week and insisted she make meaningful reforms to business rates.
He told the Daily Mail and This Is Money that JLP and other retailers who attended the talks ‘were pretty clear then that business rates was our number one priority, to make sure that you know the manifesto promise of reform was going ahead’. He said business rates are the largest cost after staff pay to the retailer, which could be one of those worst hit by proposed reforms to increase taxes on larger properties. Mr Tarry insisted the meeting with Ms Reeves had been ‘constructive’ and the group would ‘react accordingly’ when the Government sets out more information.
But he warned consumer confidence was fragile ahead of the autumn Budget this November and urged the Chancellor to implement changes to the business rates system. They are the largest cost after staff pay, he added. JLP could be one of those firms most negatively affected by proposed reforms to increase taxes on larger properties. It comes as Office for National Statistics data revealed today that the UK economy flatlined in July after the manufacturing sector saw the biggest contraction for a year.
There was zero growth in gross domestic product (GDP) month on month in July, against 0.4 per cent growth in June. While most economists had expected zero expansion in July, it adds to mounting pressure on the Government, which has set itself a key priority to boost economic growth. Attention is now focused on the upcoming November 26 Budget, with speculation mounting that Ms Reeves may have to raise taxes to fill a black hole in the nation’s finances.
The Chancellor has said the UK economy feels ‘stuck’ as she revealed plans to consider business rates reforms including removing ‘cliff edges’ for small firms. The Treasury is looking at changes to the current system of business rates – the tax on UK business properties – as part of efforts to cut red tape and improve growth. In an initial report into business rates, the Treasury said it would consider overhauling small business rates relief rules which ‘can discourage’ expansion and investment. The current rule means that when a company opens a second property it loses access to all small business rates relief unless it meets specific criteria.
It comes as part of the Government’s pledge to review business rates more widely amid mounting calls from firms and business groups for wholesale reform of the system. Ms Reeves said: ‘Our economy isn’t broken, but it does feel stuck. That’s why growth is our number one mission. Tax reforms such as tackling cliff-edges in business rates and making reliefs fairer are vital to driving growth. ‘We want to help small businesses expand to new premises and building an economy that works for, and rewards working people.’
Despite the extra costs on JLP imposed by Ms Reeves, Mr Tarry was upbeat about prospects for Christmas. He said: ‘If we keep doing the right things for customers, things that they want to see, and evolve and improve our propositions, we think that we can continue to progress, particularly going into Christmas – our key time.’ Peter Ruis, managing director of the John Lewis arm, said consumers would look ‘to get away from the doom and gloom’. He added: ‘The general feeling we have is whatever the economy, whatever the external environment, people will come together for a great Christmas.’
John Lewis said best-selling toys are likely to include the Uno Spin card game, a wooden air fryer, Scalextric and Lego. But the employee-owned partnership said it was too early to say whether its 66,000 staff will receive a first bonus in four years. While losses across the partnership deepened, first-half sales rose 4 per cent to £6.2billion, with Waitrose up 6 per cent to a record £4.1billion and John Lewis 2 per cent higher at £2.1billion. A former boss of Tesco in the UK, Mr Tarry was hired last year to revive the retailer’s fortunes after years in the doldrums following the pandemic.
The department store chain, which has 36 shops, has benefited since Mr Ruis brought back its ‘never knowingly undersold’ price-matching pledge that was introduced in 1925 but scrapped in 2022. The business invested £191million in the first half, launching beauty halls across the country. It is also hoping to lure shoppers away from rivals such as Next and Marks & Spencer with ‘exciting’ fashion lines, Mr Ruis said. Meanwhile industry leaders have warned some of Britain’s biggest shops – including supermarkets and department stores – face a fresh wave of closures if the Government forces them into its proposed higher business rates tax band.
The British Retail Consortium (BRC) said its latest analysis suggested that 400 large-format stores were at risk of closure if they were included in the Government’s new business rates surtax on premises with a rateable value over £500,000. The BRC said ‘like all of retail’, these stores were already under pressure from soaring employment costs, high taxes, and rising rates bills, driving the closure of 1,000 such outlets over the last five years. It said the retail industry accounted for 5 per cent of the economy yet paid more than 20% of all business rates bills, with large stores paying around a third of the total bill.
Given the small profit margins that existed across retail – around 2 per cent to 4 per cent for food – a significant rise in rates for large stores would force these shops to raise their prices, employ fewer people, or even close their doors entirely, the BRC warned. The 4,000 large stores played a vital role in the economy by employing approximately one in three of the industry’s three million workers and, as anchor tenants, attracted footfall to shopping and leisure areas, supporting cafes, pubs and smaller independents around them, it added.
It estimated that if all 400 at-risk stores were to close, up to 100,000 jobs could be lost and local councils’ business rates receipts from retail would fall by ‘well over’ £100million a year. The BRC is calling on the Chancellor to use the autumn Budget to deliver changes ‘without simply shifting the cost onto larger stores – which would be massively damaging to our high streets’. It suggested this could be done without cost to the public purse by removing those stores from the new higher business rates tax band and slightly increasing the rates to be paid by the remaining large properties like office blocks and other big commercial buildings, where business rates were a smaller share of costs and the knock-on impact on jobs and prices was lower.
BRC chief executive Helen Dickinson said: ‘Britain’s largest shops are magnets, pulling people into high streets, shopping centres and retail parks, supporting thousands of surrounding cafes, restaurants and smaller and independent shops. ‘After years of rising costs, far too many stores have disappeared – leaving behind empty shells that once thrived at the heart of our communities. Four hundred more large stores could disappear if the Government forces them into its new higher tax band. This would mean up to 100,000 jobs lost, emptier high streets, and less revenue for the Exchequer.
‘The Chancellor can back families, jobs and high streets this autumn, by excluding large shops from the new higher business rates tax band. This would not cost the Exchequer a penny, yet would help secure the future of 400 retail stores, and the communities they support, right across the country. ‘But failure to act risks shuttering hundreds more stores, costing jobs, communities and the economy far more in the long run.’
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