Business rates must be replaced by a 2% sales tax in a bid to remove the disparity between online and physical businesses, Grimsey Review 2 author Bill Grimsey has told RN. 

Speaking the week after the publication of his report on improving Britain’s struggling high streets, Mr Grimsey said the tax would better represent a small business’ financial circumstances than business rates.

“Outdated business rates will leave independent retailers on the breadline and they need replacing,” he said.

“A 2% sales tax would still generate billions of pounds and remove the disparity between online and offline businesses. If you take retail sales of £406bn last year, the tax would have generated more than £8bn.”

Of last year’s retail sales, online contributed more than £72bn. In comparison, the Ministry of Housing, Communities and Local Government said business rates collected by local authorities will rise £847m this year to £24.8bn. Additionally, the number of insolvent business last year rose from 21,267 to 21,662, and Mr Grimsey said there could be more insolvencies as a result of business rates.

Figures from the Association of Convenience Stores suggest more than a fifth of convenience stores are based on high streets.

The latest review also makes proposals to transform high streets into ‘community hubs’ offering events, free wi-fi and more public buildings such as libraries. 

Mr Grimsey said: “It would take four years to start seeing results, but convenience stores should welcome this because high streets are under threat of losing footfall to out-of-town retail parks unless they use a different approach.”

Stockton-on-Tees Borough Council, which followed the advice in the first Grimsey review in 2013, now holds 90 annual events, such as firework displays, on its high street. 

The council’s chief executive Neil Schneider told RN: “The high street’s retailers see an 18% to 25% increase in footfall during these events.”

Read more: New business rates proposal could relieve financial concern for retailers