WPI Strategy has produced a report, commissioned by Tesco, which aims to highlight the areas of the UK most suffering from regional inequality; to outline the role that the retail sector can play in addressing these challenges; and to shine a light on the policy barriers that are limiting the ability of retail companies to invest and grow in areas in need of levelling up. We make a series of recommendations for policies that can remove these barriers and unleash new investment and growth across the UK.

We conducted two major pieces of analysis for the report:

1 – A Levelling Up Index, which assesses every parliamentary constituency in England and Wales in terms of their levelling up needs.

Please click here to view the Levelling Up Index interactive map in full.

The Index finds that:

• Around 70 per cent of the constituencies most in need of levelling up are in the North and Midlands.

• 17 of the 20 places most in need of levelling up are in the North, with the remaining three being in the Midlands

2 – A regional breakdown of business rates burden as a proportion of earnings, using Tesco data, shows:

• Shops in the North and Midlands face a higher burden than those in the South. 77 per cent of constituencies in the top 10% of rates burden are in the North and Midlands, compared to just 18 per cent in London and the South. This is because the tax rate does not mirror economic performance, so for areas facing economic challenges the burden is much higher

• 32 of 40 constituencies with the highest burden of business rates are located in areas of the country most in need of levelling up. For example, Bishop Auckland, Sunderland Central, Great Grimsby, and Leigh.

• Shops in the top 50 constituencies most burdened by rates have four times the business rates burden of those in the bottom 50. If the top 50 constituencies faced the same burden as those in the bottom 50, they would save £54m per year.

At a constituency level, the difference is even starker. A typical supermarket in Bishop Auckland faces a rates burden eight times higher than a supermarket in Surrey Heath. If the supermarket in Bishop Auckland faced the same burden as one in Surrey Heath, it would pay £820,000 less in rates per year.

The report makes a series of recommendations including reducing business rates to a fixed, 40 per cent tax rate for retail to support shops in the UK’s regions. Rates is the single biggest barrier to retail investment in levelling up constituencies and a 20 per cent reduction in the rate would stimulate growth and investment.

Chris Walker, author of the report, said:

“This analysis shows, for the first time, which areas of the country need levelling up. It also shows how far a single policy change could deliver massive benefits to these communities: reducing business rates. Most other taxes are linked to prosperity and are progressive, but in the case of business rates that system has broken down.

“Communities around the UK simply need a level playing field and a business environment which fairly reflects the benefits of trading in every nation and region of the UK. Making the changes we suggest in this report would support our most at-risk high streets and help hundreds of communities to thrive.”

Jason Tarry, CEO UK & ROI, Tesco:

“The COVID-19 pandemic has highlighted more than ever the vital contribution of retail workers, and we are proud of the role that our stores play in serving their local communities. As this report makes clear, retail has a bright future and can continue to support communities across the UK, but business rates remain a major barrier. Now is the opportunity to reform business rates; create a fair and sustainable future for retailers and provide a vital boost to the communities most in need of levelling up.”

James Daunt, Managing Director, Waterstones:

“In many towns across the UK, and especially in the north of England, the cost of business rates jeopardises the continued existence of our bookshops, as it does that of so many other retailers.

“Action must be taken to reduce this regressive tax. Bookshops offer a place of community and learning for people of all ages. All shops offer local jobs, many of them flexible and almost impossible to substitute. The damage to our communities by the loss of shops is heartbreaking. It is also largely avoidable.

“The government has an opportunity to level the playing field between physical and online retail. A permanent reduction in business rates funded by the introduction of an online sales tax would protect jobs where they are most needed and give new life to high streets right across the country.”

Paddy Lillis, General Secretary of Usdaw:

“Usdaw has deep concerns that many regional town centres are in danger of becoming ‘ghost towns’.  More shopping is moving online and this trend has been accelerated by the current Coronavirus crisis.  At the same time, shops are still facing overheads and costs, like business rates, that were designed many years ago for a bygone era.  We can save our shops on our high streets and in our communities but we need radical action.  The time has come for a reduction in business rates and the introduction of an online sales tax.  Usdaw welcomes the publication of the Open for Business report.”

Steve Murrells, chief executive, The Co-op:

“This research from WPI Strategy provides powerful evidence to explain the decline in high streets, with some regions suffering the loss of jobs and investment even more acutely than others. Our Community Wellbeing Index complements the WPI work, revealing that the cost is a human one. Without a common place to spend time and socialise, people’s collective wellbeing suffers and this in turn can lead to pressure on public services and the public purse. A thriving local community, driven by small business and enterprise, can bring neighbourhoods together, create a real sense of pride, drive co-operation and local self-help.

“As the government looks to ‘level-up’ regions across the UK and review Business Rates, I urge the Chancellor to look at a reduction of business rates and an online sales tax as a cost neutral way of not only creating jobs and encouraging investment in our high streets but also critically improving the lives of millions of people. In our view, that comes before anything else.”

Read the report here