Multiples, independents and property agents have called for the government to freeze business rates and provide a clear strategy to revitalise the UK’s embattled retail sector, ahead of next week’s Budget.
September’s Consumer Price Index (CPI) measure of inflation, announced last week at 2.4%, will determine the annual business rates rise in England next April. Retailers across the UK are expected to be hit by a £186m increase in business rates as a result. The overall business rates bill is expected to increase by £728.2m in England.
The executive vice-president of one menswear multiple told Drapers the government should consider freezing rates: “A business rates freeze would be very welcome. The amount we are paying [in rates] is incredible, and many argue that the costs are disproportionate.
“However, [rates] are not high on the agenda, and the increases will go through as planned.”
He added that more needed to be done to revitalise town centres. He said business rates relief would be “fantastic, but it won’t get buildings that are lying empty back up and running again.”
The chief executive of one womenswear retailer agreed: “If the money that is taken off from rates is swallowed up by landlords it won’t help. Any rate reduction or tax cut needs to be used wisely to reinvigorate town centres.”
The chief executive of one premium multiple said more government support was needed: ”It is an unfair tax, and [retailers] are going to be unable to keep shops open. It is that simple. I wouldn’t ever look a gift horse in the mouth, and every little does help, but [a temporary freeze] is a drop in the ocean. It really does depend on what [the chancellor] does with it.”
John Webber, head of ratings at real estate services company Colliers International, said the business rates hike was “pain on top of pain” for retailers, but warned a freeze was unlikely: “[The increase is] pouring petrol on top of the fire of what is happening on the high street.
“The government can’t freeze rates for just one sector, and if they freeze it for everyone it will cost them millions.”
Mark Williams, director at asset management company Hark Group and president of retail property body Revo, said business rates were a “disproportionate tax burden shouldered by retailers trading from stores”: “We have never seen this level of distress in the retail sector, and the government must act to ensure that high streets – the heart of our local communities – survive.
“We are arguing for the introduction of an online sales tax to both reduce the tax paid by retailers where customers buy in store, and to fund the infrastructure and improvement works that town centres across the UK so desperately need. The government cannot afford to delay action any longer.”
Meanwhile, chancellor Philip Hammond is understood to be considering a £300m tax cut for shops in Britain’s most deprived town centres.
The plans, which are expected to be included in the budget next week and would come into effect from April, have been welcomed by independent retailers, but many have called for a more radical overhaul of the business rates system.
Paul Morarji, owner of menswear independent Niro in Peterborough, said: “The government should look at businesses independently, and business rates should be based on turnover. You can’t have the same rate for every business, otherwise independents can’t compete.
“The climate is getting worse and worse around here. Businesses come and go [here] all the time.”
Sumit Shah, founder of contemporary independent Squared Clothing in Hull, said more needs to be done to boost footfall on the high street: “Fewer people are coming into towns – they’re visiting retail parks, and online is also taking a lot of our business.
“The government should encourage people to visit the city centre and make it the hub of the community. A lot of businesses are based [in the centre] and there should be a good atmosphere.”
Business rates bills are calculated by multiplying the property’s rateable value – an estimation of the open market annual rent on 1 April 2015 – by the multiplier.
The multiplier represents, as a percentage, the number of pence in each pound of the rateable value that will be payable in business rates before any relief or discounts are applied.
The standard multiplier, which applies to 492,165 larger premises in England that have a rateable value of £51,000 and above, will rise to 50.5p, from April next year. It will be the first time the tax rate for business rates has gone above 50%. So, a business with a rateable value of £51,000 will have a rates bill of £25,755 before any relief is applied.
When the national business rates system was introduced in 1990, the multiplier was set at 34.8p.