Tesco boss warns the Chancellor of effects of ‘unsustainable’ rates

Last month industry experts warned that high street retailers are set to be hit with a 17.2 per cent jump in business rates bill

Dave Lewis told the CBI conference that failure to act will lead to mass job losses (GETTY)

Dave Lewis, the chief executive of Tesco, yesterday demanded “urgent reform” to business rates. In a landmark speech at the CBI conference in London, he said that the current system of business rates was “unsustainable” and he sent a clear warning to George Osborne that if the Tories fail to act, it will hit the retail sector with subsequent widescale job losses.

Mr Lewis said: “Over last five years property values have fallen, profits are down but business rates are up. Quietly but dramatically.”

Last month industry experts warned that high street retailers are set to be hit with a 17.2 per cent jump in business rates bills, as the amount paid by stores and chains breaks through the £8bn-a-year barrier for the first time.

Mr Lewis leapt on that figure. “Business rates have hit £8bn for retail,” he said, adding: “That’s over a quarter of the [overall business rates] bill and significantly more than any other sector.”

Against that he referred to other squeezes that are creating “a potentially lethal cocktail”, such as the fact that food inflation has slumped from 4 per cent two years ago to minus 2.4 per cent today.

“That’s great news for the customer but definitely a very significant pressure in parts of the retail industry,” he said.

Meanwhile supermarkets’ profitability has sunk from 5 per cent to 2 per cent in five years.

Rising business rates have created “an enormous pressure”. The net result? “Shops have closed. Businesses lost. Jobs sacrificed.”

The warning, he told Britain’s bosses at the conference, and directed at the Chancellor, was stark: play ball or face disaster for the retail sector and ultimately the economy.

To remind Mr Osborne of the potential scale of that disaster, Mr Lewis pointed out that retailers contribute more than 5 per cent of GDP, while employing 3 million people; he added that nearly 10 per cent of the whole workforce is in retailing, in one way or another.

“Our own business rates bill has increased by well over 35 per cent in the last five years,” he said. “It’s the biggest tax we pay and it is now three times OECD average. For every £1 we pay in corporation tax, large UK retailers pay £2.31 in rates. It’s unsustainable and needs urgent reform.”

The British Retail Consortium has led the call for an overhaul on business rates, which are calculated based on the rental value of each premises. Ministers had promised to hold a review into changing the system, with the Chancellor revealing that local authorities will be able to keep 100 per cent of business rates collected. However, there has been no update on when the system will be overhauled.