House of Fraser London stores rocked by massive business tax rises
The problems facing House of Fraser as it works to reduce the size of its store portfolio became clear on Friday with news that its London branches saw a massive hike in business taxes last year.
The company’s Oxford Street flagship store alone saw its rateable value, which is used to calculate the tax due, rise from less than £6 million to £9 million.
Real estate adviser Altus Group told newspaper City AM that this means the company will pay £18.57 million in business rates over the four years of the business rates cycle until the revaluation due in 2021. This year, that single store will have to pay £4.62 million, which is £1.66 million up on 2017’s bill.
This makes it clear that the company is facing major affordability challenges not just in regional stores in low footfall locations as had been assumed, but in its highest-profile locations too. These may be shopper magnets but are also expensive to maintain and there are limited to what level of rents and rates businesses can cope with. In fact, the reason House of faster cited some years ago for closing its Dickins & Jones store on Regent Street was a massive rise in its rent bill.
It certainly explains the need for a company voluntary arrangement (CVA) that should see HoF able to exit some store leases but also to negotiate lower rents on others. However, the newspaper also said that a “backlash against the plan is building as the British Property Federation said the group had not followed best practice of consulting landlords first.”
Those landlords have been battered in recent periods by a string of company failures and CVAs. They have been forced to swallow rent reductions or face large sites lying empty and reducing the appeal of the wider malls, retail parks and high streets that they own. Will HoF be the one to which they say no?
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