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Next CEO Lord Simon Wolfson says business rates accelerating 'process of failure' on the high street

The chief executive of Next has called on the government to reform business rates, which he says are accelerating the rate at which high street shops close.

Lord Wolfson, a Conservative Party peer, says the tax on commercial property has not been updated to reflect the increasing popularity of online shopping and needs changing.

"The one thing that I think the government must do is make rates more responsive to today’s reality," Simon Wolfson told ITV News.

"Let the thriving towns and cities, we should be paying high rates, but the ones that are dying, actually that process of failure is being accelerated by rates that are stuck at levels that don’t reflect today's reality".

Business rates are a tax on property.

Companies pay them on their shops, warehouses, factories and offices.

The tax raises £30 billion a year for the government and local authorities.

High street retailers tend to pay more business rates than online retailers, like Amazon, for obvious reasons.

The smartphone is increasingly the shop window of choice, the shop isn’t the asset it once was.

  • Wolfson on business rates

Demand for retail space has fallen to its lowest level since the last recession.

Commercial property values and rents have tumbled but business rates, largely, have not.

"There are lots of our shops where we pay higher rates than we do rents," Wolfson says.

"I would have more frequent revaluations, up and downwards revaluations, so the rates are a fair reflection of the value of that property".

Around one pound in every five is spent online and counting.

Wolfson admits he has no idea where the balance will settle or how many of the 530 stores Next has in the UK he will need in the years to come.

"If our customer wants to buy more online we have to gear up to do that, if they want to buy less in the shops we have to slowly shrink our store portfolio to make sure it is the right size.

"One interesting fact is that of the goods we sell online 50% of them are collected from a store and that’s what gives me absolute confidence that stores will be there in five or ten years' time."

Wolfson is arguing for business rates to be re-calibrated rather than cut.

He suggests the tax could still raise £30 billion for the government annually, but needs changing to ensure that successful retail locations shoulder the greatest burden.

"Give the unsuccessful a break," Wolfson proposes.

He believes the gap between good and bad retail locations is getting wider and expects high streets to continue to empty.

In his view, lower business rates for struggling communities offer the best chance of their reinvention.

There is a consensus that business rates have failed to keep pace with the times.

John Lewis has also complained that the tax hands Amazon and other online rivals an unfair competitive advantage. Credit: PA

The likes of Debenhams, Sainsbury’s and John Lewis have also complained that the tax hands Amazon and other online rivals an unfair competitive advantage.

Perhaps surprisingly, Wolfson disagrees.

"Everyone is looking for a villain and the reality is that Amazon does a great job for its customers, if we are going to compete with them we need to do a great job for our customers...I think the reason that people are shopping less on the high street is because they have found other ways to get product that they find more convenient.

"This is being driven by the consumer, Amazon isn’t making people order from them."

  • Wolfson on Amazon

Wolfson believes that internet shopping is a blessing,offering households and businesses opportunities, convenience and choice that hasn’t existed previously.

But change, however welcome, is also painful.

At the margins, he thinks the government could and should be doing more.

At the moment the government has its hands full negotiating the terms of our departure from the European Union.

Simon Wolfson supported the Leave campaign in the run up to the referendum.

In the past he has been critical of the way the government has handled the talks with the EU but does not regret the way he voted.

Wolfson wants a smooth and orderly brexit but admits that might not be possible.

He says he remains concerned about Britain "either crashing in or crashing out".

  • Wolfson on Brexit

"I am more worried about crashing in - being locked in (the EU) forever," he explains.

"That people say this (the negotiations) is too difficult, that the EU won’t give us anything so we will just give in and stay in.

"I would be worried about that but equally I would be worried about crashing out. What we do need is a solution, not everyone will be happy."

Wolfson says Next has done all it can to contingency plan for if Britain leave the EU abruptly in March without a transition deal.

"The most important thing us that our ports and airports are geared up to deal with the increased workload in customs."

Wolfson says. "Businesses are ready but my worry is not businesses but the government.

"Has it worked out the policies it needs to put in place if we don’t do a deal?"

Wolfson isn't convinced the government has and he isn't alone.

  • Wolfson on future of Next