It’s all over. Three and a half years after the EU referendum, two years after Theresa May’s majority vanished and the day after one of the most decisive elections in British history, Boris Johnson is heading to Buckingham Palace today to tell the Queen that he’s got a thumping majority.
Like most workplaces across the UK, this Yoyo-er walked into a pretty stunned office this morning.
I’ll keep most of my opinions of what I think to myself.
But before settling into Friday morning’s work, I thought I’d take a wee look at the Conservative manifesto to see if Boris had said anything about sorting out our high streets.
Here’s what I found:
“We will cut the burden of tax on business by reducing business rates. This will be done via a fundamental review of the system. As a first step, we will further reduce business rates for retail businesses, as well as extending the discount to grassroots music venues, small cinemas and pubs.
“That means protecting your high street and community from excessive tax hikes and keeping town centres vibrant.”
Conservative Party Manifesto 2019
Considering our mission is to modernize the high street retail experience, Yoyo views this promise as good news (if the Tories keep it).
There’s no doubt the high street has taken a bashing in recent years, as online shopping grows.
Although 82% of transactions continue to take place in physical stores (source: ONS) – and high street retailers, which are harnessing the right technology to deliver better customer experiences, are seeing a healthy return on investment.
But of course, solving the high street challenge is not just about introducing fast, convenient and personalised experiences that customers have become so used to online.
A combination of increased costs and business rates have created what experts have called a “perfect storm” for the high street in recent years.
Business rates have cost companies £31 billion a year and since 2010 increased from 41.4% to an eye-watering 47.9%, according to accountant EY.
Not only has this squeeze placed huge pressure on high street stores, if anything it’s actually given even more of an advantage to online-only retailers.
They have far cheaper cost infrastructures – usually renting an out-of-town warehouse space – with a business model that charges for delivery.
As a response, the previous Conservative government announced a £900 million business rates relief for small retailers earlier this year, as the Treasury looked to combat this “perfect high street storm”.
Around half a million small retailers, which had a rental value of £51,000 or less, would see their business rates cut by a third.
In two much-quoted examples, this meant a Sheffield pub with a rental value of £37,750 would see a £6,178 cut on its on business rates in 2020, while a Birmingham newsagent with a rental rate of £14,250 would save £1,749.
This cut was indeed a welcome immediate relief for small retailers, as well as many in the services and catering industries.
However, little was addressed for the larger retail chains – many of which have been the biggest casualties in recent years.
Yoyo CEO Michael Rolph said at the time:
“Even if Philip Hammond had chosen to cut business rates for the larger retailers, it would not have been a long-term fix. Fundamentally, the current business rate tax system is broken for the retail world we live in today.
“If the government is really behind getting the high street back on track, it needs to replace business rates with something that takes into account the unfair cost advantage that still exists for online.
“What’s required now is a fair sales tax that applies equally to both bricks and mortar and online retail.
“This tax could be either be set to a consistent rate for all or could have some form of tiering based on the cost of goods sold – so if you’re an online retailer and you’re cost of goods is low, you would be expected to pay a higher sales tax.
“At the same time, if you’re based on the high street paying high rents, but generating footfall and sales for the surrounding area, you’re sales tax rates contribution would be adjusted accordingly.”
The Tories’ promise to now cut business rates further is all well and good, but Yoyo thinks we need a lot more imagination to save our high streets.
Boris Johnson has said: “We will cut the burden of tax on business by reducing business rates. This will be done via a fundamental review of the system.”
When (if?) this “fundamental review” takes place, the government will need to think about how they can create a more level playing field in terms of the underlying costs of retailers.
This will enable them to spend more time improving in an area that online has long been winning – the customer experience.
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