The outgoing boss of John Lewis has warned that increasing business rates on large shops will damage the High Street and rob young people of employment opportunities.
Peter Ruis, who steps down this week after three years leading the 162-year-old retailer, said a tax raid in next month's Budget would have a "terrible impact" on retailers and the wider economy.
The John Lewis Partnership is one of the UK's most prominent retail businesses, operating department stores alongside the Waitrose supermarket chain. Founded in 1864, the employee-owned company is a fixture of British town centres and shopping malls.
Ruis cautioned that customers are already grappling with a state of "perma-crisis", with many middle-aged parents deeply worried about their adult children being forced to stay at the family home because they cannot find secure work.
"Obviously people still have money but it's tough out there, isn't it?" Ruis said. "I'm someone with graduate and teenage kids. I think I read recently there are 10,500 graduate jobs compared to 60,000 or 70,000 five or six years ago. So a lot of our key customers in their 40s and 50s are worrying about their kids and having them at home."
The graduate job market has become increasingly competitive in recent years, leaving many university leavers struggling to secure entry-level corporate roles. At the same time, nearly one million people aged between 16 and 24 in the UK are currently classed as "Neets", meaning they are not in education, employment or training.
The retail and hospitality sectors have traditionally been major employers of young people entering the workforce, offering accessible roles that provide initial career experience.
Fears of a tax raid
Retail leaders are increasingly concerned that Prime Minister Andy Burnham and Chancellor John Healey are preparing to announce a fresh tax burden on large physical shops in a bid to rebalance the economy.
Industry figures fear the Government will increase the business rates paid by large stores, defined as those with a rateable value of £500,000 or more. The move is reportedly being considered to fund lower tax bills for community businesses such as pubs and music venues.
Business rates are a property tax levied on commercial premises, calculated based on the estimated rental value of a building. Traditional brick-and-mortar retailers have long campaigned for the system to be overhauled, arguing it places them at a severe disadvantage compared to online retail giants who operate from out-of-town warehouses with significantly lower rateable values.
Because business rates are a fixed cost, they must be paid regardless of a store's profitability. This makes them a heavy burden for High Street chains navigating falling footfall, rising overheads and the lasting shift towards online shopping.
Major retail chains have warned that any further tax increases could drive up the broader cost of living, while forcing them to scale back on job creation and commercial investment.
Sports Direct billionaire Mike Ashley also intervened last week, stating that the Government would be "simply delusional" to heap more financial pressure on large retail businesses.
Anchor for smaller stores
Ruis argued that penalising large retailers would indirectly harm the smaller independent shops that the Government's proposed tax changes are intended to protect.
Major department stores like John Lewis frequently act as "anchor" tenants in shopping centres and High Streets. Their large footprint and broad product ranges generate the bulk of the footfall that sustains surrounding local shopping districts, meaning any reduction in their operations has a ripple effect on the wider local economy.
"It would have a terrible impact for all retailers," Ruis said. "A lot of the smaller stores that won't be affected by that are against it because they need people like us. John Lewis is the anchor to pretty much everywhere we are, and people drive into that town to visit us and then visit everyone else, so it's really critical that that doesn't happen."
Retailers maintain that they are uniquely positioned to offer jobs to young people and graduates, but require financial breathing room from the Government to do so. Ruis suggested that reforming the business rates system would directly assist companies in hiring more staff and stimulating growth.
"I think the economy moves fastest with retail and hospitality," he said. "When you see the two of us going gangbusters, the economy starts to pick up."
