Debenhams is to hand local authorities an ultimatum aimed at securing business rates cuts as it draws up plans for a fresh wave of shop closures.
Sky News has learnt that the embattled department store chain is preparing for talks with councils in which it will indicate that a refusal to lower rates bills could threaten their local Debenhams outlet.
The aggressive negotiating stance comes as Debenhams also seeks further steep rent cuts from some landlords, in addition to big reductions agreed last year as part of a deal with creditors.
Sources said on Wednesday that the willingness of councils to agree to cuts would help to determine the locations of 28 further outlets which will be closed by the end of 2022.
Debenhams’ rates bill is reported to be approximately £70m even after a swathe of initial closures.
The company has said for the last year that it would seek to shut a total of 50 shops, leaving around 100 as its core estate.
In a statement, a Debenhams spokesman said: “22 of those 50 stores have closed already and we are currently working to identify the remainder.
“Property costs, both rent and rates, are a huge burden for retailers and as such have an important influence on whether stores are profitable or not, and therefore we are planning discussions with councils and landlords to identify how stores could operate profitably going forward.”
While business rates are set by the government, Debenhams is asking some local authorities to accept smaller sums than they are owed.
A property industry source said the department store chain’s negotiating tactic was effectively an ultimatum to councils that a refusal to compromise on rates meant their local stores were likelier to be identified for the axe.
People close to Debenhams described the tone of forthcoming conversations as “constructive” and denied that they would amount to an ultimatum.
Earlier this month, dozens of retailers – including Asda, B&Q and Ann Summers – wrote jointly to the Treasury to argue that the “burden of business rates has become unsustainable for many retailers”.
Debenhams, which has not disclosed details of its festive trading performance, has lurched from one crisis to another over the last 18 months.
It is now privately owned by a group of hedge funds after a 15-year stint as a stock market-listed business.
Its holding company was forced into administration last spring, and since emerging from insolvency proceedings has endured an anxious wait to implement a turnaround plan that involves slashing thousands of jobs.
A legal challenge to Debenhams’ Company Voluntary Arrangement, funded by Mike Ashley’s Frasers Group, was recently rejected.
Mr Ashley had fought a running battle with Debenhams, lodging a string of proposals that would have given him control of the business and allowed him to combine it with HoF, which he acquired in 2018.
Debenhams confirmed last autumn that it had lined up £50m of additional support from lenders.