Mark Carney has weighed into the debate on business rates, saying it has become a “real issue” for retailers across the country.
The Bank of England Governor was asked by MPs whether the tax on business properties was having a notable effect on UK firms.
“The short answer is yes – yes, it’s a real issue,” Mr Carney told the Treasury Select Committee.
“It’s one of those issues that is guaranteed to come up in every visit to business regional roundtable(s),” he said.
The high street has come under strain from a combination of rising rents, business rates and labour costs, at a time when discretionary spending have come under pressure.
It has already led to the administrations of the likes of Maplin and Toys R Us, while Byron, Prezzo and Jamie’s Italian, New Look, Mothercare and Carpetright have all shut stores.
Mr Carney said: “We should start by acknowledging that this country has the most competitive and in many respects the most innovative retail sectors in the world and part of the consequence of that is … consumers are well served, margins in the sector are very tight, and births and deaths of firms – even historic names – are frequent.”
There are many retailers left with legacy assets and costs that make them uncompetitiveMark Carney
He said conversations with retail bosses have revealed that the drivers of this “phenomenon” are “very much linked to the changing spending habits of British consumers, a lot more steady growth of online, much less footfall.”
“And as a consequence of that there are many retailers left with legacy assets and costs that make them uncompetitive … then on top of that there are difficult trading conditions.”
Consumer spending habits have been influenced by a real income squeeze, impacted by wage growth which has lagged behind the rate of inflation.
Mr Carney says he expects household spending to rise as wages pick up.
“But the pace of consumption growth in our forecast is one half the rate that consumption was growing prior to the (Brexit) referendum, and one third the rate that consumption was growing prior to the financial crisis – so it’s just a different order of magnitude,” he added.
“And in an environment where you’ve got tight margins, you’re getting these broader secular pressures and you have legacy costs, legacy estates – it is a very difficult environment.”