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No Alternative – Final Chance For Chancellor On Business Rates


The discussion over Business Rates has long ridden high the UK’s property media headlines and the Government has been hesitant to engage with the matter by way of no meaningful response to calls for reform.

With the Autumn statement upon us, small high street business operators and retailers across the country see this as the Chancellor’s last stand – ‘will they’, ‘wont they’ finally address the issue of business rates and revaluations, or will they simply send another curve ball to cause further painful subterfuge at the cost of possibly thousands more stores and businesses closures on the high street – throughout the next Government term.

First established as the Poor Law in 1601, Business Rates have grown 25% since 2008 and with so may regional high streets still haemorrhaging shops who simply can’t pay the bill, the situation needs to be addressed tomorrow, with radical reform. The UK now pays the highest property taxes in Europe and for many businesses and retailers, the case is clear that the rates bill has absolutely no reflection on property value today.

A BBC News feature posted today highlights the plight businesses and retailers across the country. With business rates linked directly to the size of the physical space of the business, how can it account for online businesses?

The BBC’s example clearly demonstrates what’s happening at the top end of the retail market. The news websites states: “…So, for example, Harrods and the online retailer Asos both have similar turnovers, of £716.3m and £769.4m respectively, but Harrods faces a business rates bill of £11.5m in 2014-15, while Asos is set to pay £935,000”.

In industry, the position of the shopping centre industry is clear form the standpoint of the BCSC who issued a press release calling for change.

Along with several other measures, the BCSC has proposed a set of recommendations led by the call for regular revaluations of property in line with the turbulent nature of the retail sector’s property value performance across the country. In the statement, it adds: “…this would be made practical through the exemption of all hereditaments with a rateable value of less than £12,000, which currently account for 64 per cent of all assessments made but only total around 6 per cent of the income of the business tax”.

The BCSC also highlights that more commitment is needed beyond the current Administration Review, the Government needs to also review the link between the business rates multiplier and RPI to ensure business rates reflect current economic conditions.

Speaking up for smaller businesses and retailers, Bill Grimsey the once CEO of Wickes, is now the ‘high street adviser’ to the Labour Party. Grimsey presents a strong case study for reform in the New Statesman today that highlighted just how dire the situation is for the smaller independent shops and stores – he stated a Fish ‘n’ Chip shop in Rochdale pays £6,000 rent a year yet its business rates tax is £19,000.

Grimsey highlights a cost-effective path to reform. He states that a Treasury restructuring of Valuation Office Agency, the Government agency that sets the Business Rates (most people probably haven’t even heard of it), will eradicate the bureaucracy and administration of the current system and paths the way for a new fairer approach to annual revaluations.

What is clear from all corners of the business community is that something has to happen. Business Rates has the potential to will be a vote loser for Conservatives if they don’t change the current system.

The situation is complex. With £26.9Billion raised by Business Rates this year it’s a healthy pot of rich pickings. That said, the pressure on the Chancellor to continue to reduce the deficit has never been greater (which he’s struggling to do borrowing £3.7Billion more in April to October 2014 than in 2013).

With promises tomorrow to the NHS offering a further £2Billion to avoid further strike actions, there is simply no easy answer to Business Rates from a Treasury or political point of view.

 

Euan Blake, Account Director

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