Ministers must take some blame for high street’s demise – retail boss
Gary Grant of toy retailer The Entertainer said business rates remain ‘the elephant in the room’.
The boss of toy retailer The Entertainer has condemned Britain’s soaring business rates, saying the Government must take some responsibility for casualties on the high street.
Founder Gary Grant said last year’s rate hike had been a “real killer” for retailers by heaping financial pressure on firms already suffering from squeezed margins.
His criticism comes amid a spate of restructuring and refinancing deals involving British retailers, as they grapple with a double-whammy of rising costs and waning consumer confidence.
The Government just haven’t got it. They need to take some responsibility for the high street’s decline Gary Grant
While pressures from rising inflation and the National Living Wage have hit retailers, Mr Grant said business rates remain “the elephant in the room”.
Speaking to the Press Association, he said: “Landlords are being very realistic about their rent, but the one thing that is not negotiable are business rates.
“(The retail sector) is seeing many stores empty for long periods of time and the biggest issue is that (retailers) can’t open stores.
“Business rates are out of line now with retail turnover. Business rates are the real killer. Any increase in cost where you have flat and declining turnover is going to put pressure on the bottom line.
“The Government just haven’t got it. They need to take some responsibility for the high street’s decline.”
Retailers, hospitals, pubs and schools were among those dealt a hammer blow in April last year when the first business rates revaluation for seven years left many facing crippling bill hikes.
The April 1 rates overhaul saw 1.9 million properties in England revalued and rates rise for 500,000 businesses.
Despite the concerns, The Entertainer has managed to defy the gloom engulfing the high street by keeping a tight rein on costs and focusing on its lucrative range of own-brand toys.
The retailer, which has 145 stores and 1,360 staff, booked a 37% surge in pre-tax profits to £11.5 million for 2017/18, while revenues lifted 7% to £162 million over the period.
Such has been the challenge for other retailers that a restructuring process known as a company voluntary arrangement (CVA) – which allows firms to negotiate discounts on rents and close loss-making stores – has become the go-to lifeline.
New Look has shut 60 stores through a CVA, while Carpetright is pursuing a similar strategy that could see it close another 81 stores and tap investors for £60 million.
Toys R Us announced a CVA at the end of last year in an attempt to shore up its financial position, but it failed to find a last-minute buyer and succumbed to administration, sparking more than 2,000 job losses.
Mr Grant said CVAs should be used with caution, and could be avoided if there was better dialogue between landlord and tenant.
The sad thing is that if the underlying business isn’t strong, then closing a few stores isn’t the answer Gary Grant
He said: “At the end of the day if a business cannot afford the rent, and can work together to address their unprofitable sites, CVAs could be avoided.
“I think The Entertainer is known for being tough in its negotiations, but when I sign a lease I sign for 10 years.
“That is a 10-year commitment of 120 months of rent that will be paid on time. That is my side of the bargain and therefore it’s important that I end up with lease conditions that enable the business to be viable.
“When CVAs work that is good for the rest of the employees that still have a job, but if they don’t work then everyone loses their job – and Toys R Us is a good example of how they don’t work.
“The sad thing is that if the underlying business isn’t strong, then closing a few stores isn’t the answer.”