Rachel Reeves must intervene to assist British retailers by ending an imports tax break that favours Chinese online rivals and rethinking plans for higher levies on large stores, the boss of the DIY chain B&Q has said.
The outspoken plea comes as the government faces growing pressure over its management of the economy after the Bank of England said when it cut interest rates on Thursday that tax rises were contributing to rising inflation and unemployment.
With a raft of major retailers including Poundland, River Island and Claire’s all expected to close large numbers of stores this year amid poor consumer confidence and increases in employers’ national insurance payments, the minimum wage, packaging taxes and business rates, Reeves faces rising calls to help consumer businesses, which are major employers in the UK.
However, after a recent round of negative economic data on jobs, growth and price rises prompted a warning this week from the NIESR thinktank of a looming deficit of more than £40bn, fears are growing that ministers are preparing the ground for a fresh round of tax rises in this autumn’s budget.
B&Q’s Graham Bell suggested one area where the chancellor could really help British business would be to tackle the “de minimis” rule that has underpinned the rise of the fast-growing online specialists Shein and Temu.
This rule, which allows overseas sellers to send goods valued at £135 or less direct to British shoppers without paying any customs duty, is “killing the high street more than anything”, said Bell, who ran the Screwfix chain before taking the reins at B&Q in 2018.
“This even put some of our suppliers out of business, not just the retailers,” he added.
Bell also urged the government to reconsider plans to increase business rates on stores with a rateable value of more than £500,000 from next year. The move, intended to fund ongoing tax breaks for smaller retailers, has already been criticised by the bosses of big retailers including Sainsbury’s and Next.
“They keep going on about the high street and if you look at what’s happening it is their [actions] that are knocking the high street,” Bell said.
He said the national insurance and minimum wage rises from April this year had been “hugely costly” as minimum wage increases had prompted pay rises throughout the business to maintain differentials. The changes have partly driven a surge in use of self-checkouts, with more than 80% of B&Q sales now being rung up using them, compared with about 10% about three years ago.
The chancellor said in April that she was considering changes to the de minimis tax break. No further action, such as a consultation, appears to have been taken on the matter since, but a government spokesperson said the chancellor’s review “is ongoing and will report in due course”.
Fears of China’s retailers and manufacturers dumping goods in the UK have grown since the US in May revoked its own de minimis exception for Chinese-made goods, under which parcels with a value of less than $800 (£600) shipped to individuals had been exempt from import tax. It recently announced plans to scrap the tax break for items from all countries later this month.
The EU said in February it would phase out its exemption on customs duties for low-value parcels.
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Bell, whose group runs dozens of stores and now has an online marketplace for home improvement gear that directly competes with the likes of Temu, said the overseas rivals were part of “a huge market that’s not going to go away” and the government “needs to do something to regulate it now, or it’s going to get out of hand”.
He said the fear was not just of being undercut but that products sold on rival marketplaces may not go through the same safety checks as B&Q products.
“We go through lots of hoops, for our product passing quality control, sustainability, all our wood is Forest Stewardship Council,” he said, arguing that rival products “come in under the radar”. Shein and Temu have previously said they have systems to vet sellers and take down unsafe products.
Bell said it was unclear how may B&Q stores might be affected by the planned business rates changes but even small stores in expensive locations such as London could have to pay more alongside larger out-of-town sites in prime locations.
While the CEO said he did not envisage closing or downsizing stores as a result of the tax change, he added: “It stops us investing maybe in our small stores that we’re going to do on the high street or investing in existing infrastructure.”
Bell said the business would be “quite happy take our share” if the government focused additional business rates on warehouses, to target online sellers as the business rates adjustment was originally supposed to do.