Mike Ashley's Frasers Group says budget support is 'near worthless' for big retailers

Mike Ashley’s Frasers Group (FRAS.L) has slammed the business rates relief announced in the chancellor’s budget on Wednesday, calling it “near worthless” and a “disappointment.

In a brief statement, the company, which owns Sports Direct, Jack Wills and Evans Cycles, said it will have to review its entire portfolio to “ascertain stores that are unviable to unrealistic business rates”.

“Whilst the retail industry as a whole has repeatedly asked for structural reform of business rates, none has been forthcoming,” the company said.

“Frasers Group and many retailers would have expected suitable relief until structural reform is implemented.”

It added: “The £2m ($2.76m) rates cap on 'businesses' from July 2021 to March 2022, makes it a near worthless support package for large retailers. Frasers Group believes that retailers should pay the fair amount of rates in line with realistic rateable values, but instead we continue to have an unwieldy, overly complex, and out of date business rates regime.”

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Frasers also voiced concern that the rates cap will make it almost impossible for the firm to take on former Debenhams sites with the inherent jobs created. After Boohoo (BOO.L) bought Debenhams’ brand and website in January, it was reported that billionaire retail tycoon Ashley was eyeing some of the chain’s vacant stores.

However, real estate adviser Altus Group said had it not been for the 12 months business rates holiday during 2020-21, the average business rates bill for a Debenhams department store would have been £484,506.

It estimated that the current holiday for retail properties will have saved Frasers around £91.2m in England and Wales during the 2020-21 financial year which ends on 31 March.

Robert Hayton, UK president of property tax at Altus Group, said: “There is a mechanism to significantly reduce rates liabilities through COVID material change in circumstances appeals reflecting the profound damage of the pandemic on property.

"The Office for Budget Responsibility (OBR) appear to forecast these appeals will cost around £3bn extra just for the year ahead but they must be settled quickly to supplement the budget measures.”

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Earlier this week chancellor Rishi Sunak revealed that the business rates holiday for non-essential retailers, which was due to finish at the end of this month, would be extended to 30 June.

This will be followed by discounted business rates relief at 66% for the period from July to March 2022, at a maximum of £2m per business for properties that were required to be closed on 5 January for the national lockdown.

The news comes after Frasers Group last month warned that it expected a £100m hit due to continued restrictions of trading. The firm said the sum reflected expected writedowns of the value of its properties and other assets.

Only the group’s Evans Cycles bike chain, which is classed as an essential retailer, has been able to trade throughout the high street lockdowns.

"It’s understandable that the Frasers Group has taken another swipe at business rates,” Danni Hewson, financial analyst at AJ Bell, said. "Mike Ashley’s retail empire has a lot of skin in the game."

"It’s never disclosed exactly how much rates relief it’s received from the government during the pandemic but with 992 UK stores it must be sizeable.

“Like many retailers its clear Frasers had hoped the chancellor would use the budget to finally address the much-discussed inequalities between online and bricks and mortar stores, but once again that can was kicked down the road."

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