The potential collapse of high street fashion chain River Island is the latest sign that rising National Insurance Contributions (NICs) are impacting more than just employers.

Landlords Facing Rent Cuts of Up to 100%

Many landlords are already being asked to absorb rent reductions to keep tenants in place. In some cases, this is escalating into significant cuts or total rent loss as retailers look to slash costs to stay afloat.

Mark Cunningham, Partner, said:

Increased staffing costs are not only impacting employers, but also the landlords they rent their premises from. As to reduce overheads, retailers may shut stores or pay reduced rents.

If River Island’s rescue plans are approved, which include shutting 33 stores and paying reduced rents on a further 71 shops, their landlords will take a significant hit to their finances. They may have to take rent cuts of between 25% and 100%. This in turn will mean their property valuations will suffer.

 NIC Hikes Adding to a Tipping Point

River Island recorded a group loss of £24.4m in 2023, a year in which employers national insurance costs alone stood at £11.1m. With the recent increases in NIC that number will only have risen further, contributing to its collapse and adding to the accelerating job losses in the UK.

These rising employment costs are tightening margins across the retail and hospitality sectors, with ripple effects now reaching landlords, investors, and local councils reliant on business rates and commercial activity.

The Need for Broader Support Measures

Forthcoming interest rate cuts will help, but the government ultimately needs to look beyond these to stimulate growth. In the meantime, they must protect the retail and hospitality businesses that support local economies and employment. Supporting them also protects commercial landlords who own the properties these businesses rely on.

Time for Targeted Tax and Rates Refor

There is a clear path forward, based on previous government responses that were both targeted and effective.

Mark concluded:

Such protection will be difficult whilst the Chancellor is under pressure, but the government has previously demonstrated that targeted, sector specific support can be effective. They should be prioritising rates reform, including enhancing and extending of the current reliefs, VAT reductions and national insurance holidays.

Would you like to know more?

If you have any questions about the above, please get it touch with your usual Blick Rothenberg contact or Mark using the form below.