Blockbuster blames Business Rates for Closure

Posted on 5 December, 2013 by Kirsten Kennedy

DVD and games rental chain Blockbuster entered administration for the second time this year in October, with mass store closures across the country greatly affecting employees in the run up to Christmas. Unfortunately, this trend appears set to continue with administrators from Moorfields Corporate Recovery announcing the closure of a further large part of the brand’s store portfolio this week.

George Osborne announced measures to reduce the burden of Business Rates today

The new wave of closures will see 62 additional stores shut up shop for good, costing 427 jobs in total. However, industry experts believe that this is only the beginning, claiming that if a buyer cannot be found administrators will have no choice but to close the remaining 91 stores that continue to trade – leaving 808 jobs hanging in the balance.

According to Moorfields, the difficulty in finding a buyer for the brand is largely due to the competitive nature of the movie rental sector, with online firms such as Netflix and Lovefilm overtaking bricks and mortar based businesses like Blockbuster in terms of consumer preference.

However, the administrator also believes that high business rates “contributed significantly” in the eventual failure of the brand.

Administrators Nick O’Reilly and Simon Thomas called for urgent action to be taken on business rates in a statement released this morning.

They said; “With the Chancellor’s Autumn Statement due later today, Moorfields are urging the Chancellor to take urgent action on business rates as retailers continue to struggle.

“Whilst the difficulties faced by Blockbuster are not solely due to the burden of business rates, the group was paying a sizeable £3.8 million on a turnover of £40 million.

“Even if, as speculated, the rates increase were capped at 2 per cent Blockbuster would have faced an increase of £75,000 on an already considerable £3.8 million.”

Chancellor George Osborne confirmed the 2 per cent cap on business rates increases in the Autumn Statement, meaning that while businesses will face a rise in tax it will be far less than the 3.2 per cent increase linked to inflation which was due to be implemented in April.

Although this may not prove popular with industry groups calling for a complete freeze on increases for a minimum of two years, commercial property agent Prop-Search believes this year’s Autumn Statement will actually take great steps in benefiting small businesses.

Prop-Search says; “In his speech on 5 December 2013, Chancellor George Osborne announced that Small Business Rates Relief will be extended for another year.

“Eligible businesses – those whose sole commercial property occupied has a rateable value of less than £6,000 – will continue to pay no business rates until 1 April 2015.

“The government estimates that over half a million small businesses will benefit from this extension.”

While many will view the Chancellor’s stance on business rates as something of a disappointment, small businesses are certainly being given more support. However, this is likely to be of little comfort to Blockbuster’s owners and employees.

Do you think business rates played a large part in other high profile administrations on the high street, such as HMV and GAME for example?




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