Pressure mounts for business rates reform as John Lewis faces £59m headache

John Lewis faces a business rates headache of £59 million next year with 22 of its department stores having bills in excess of £1m each, property experts have warned.

The three Scottish stores account for 2,675,150 in the current year, rising to 2,753,100 from April, according to Colliers. Picture: Jon Savage

The hefty charges add to pressures on costs at the retail stalwart which saw its sales dip over the festive period and has undergone a shake-up of top management.

Property firm Colliers International said its analysis of John Lewis stores in the UK showed that the department store business (not including Waitrose) faced a collective business rates bill of £57.4m in the current year – more than 30 per cent higher than before the 2017 rates revaluation, which took place in England.

This is due to rise to £59m next year, Colliers has estimated, which would represent a huge bill for a department store chain of less than 50 shops.

The retailer’s three Scottish stores, located in Aberdeen, Edinburgh and Glasgow, account for £2,675,150 in the current year, rising to £2,753,100 from April, according to Colliers.

John Lewis’ flagship London store, just off Oxford Street, is facing a business rates bill of around £10.4m this year. And Colliers has found that 21 other John Lewis department stores are paying rates bills of more than £1m each in the 2019/20 tax year, including Glasgow.

Pressure

High business rates have been cited as one of the major reasons for the current woes on Britain’s high streets, with pressure mounting to overhaul the system.

John Webber, head of business rates at Colliers International, said: “The increasing shift to on-line shopping, rising costs, including the rise in the minimum wage and dampened consumer confidence are all taking their toll on traditional department stores and John Lewis is no exception.

“We understand it is looking closely at its management layers, its annual bonuses, its Christmas advertising spend and its position with its various landlords. With such a drop in sales, it is no wonder the company is needing to take defensive measures. But, the business rates environment needs to be overcome also.”

The system of business rates is devolved to Holyrood, with MSPs debating final amendments to the Non-Domestic Rates (Scotland) Bill. However, the new legislation has already raised concerns among the business community.

Webber added: “Sadly, given recent announcements designed to help smaller retailers no one in power seems to appreciate that it is the chains that are the big employers in the sector.”