Mixed news in budget as business rates temporarily cut... but not for everyone
Many UK retailers breathed a rare sigh of relief as the annual budget statement saw business rates being cut in half. But the news wasn't as good as it seemed on the surface.
The cut wasn’t only for retail with equally-under-pressure sectors like pubs, music venues, cinemas, restaurants and hotels also qualifying. In total, the package is worth around £1.78 billion.
But there’s a catch as it’s not the permanent re-rating that retail has been calling out for and the new measure will run for just a year. And it won’t benefit all retailers to the same degree with bigger firms losing out.
However, at least it should give the UK government plenty of time to properly review business rates. These property taxes are a major problem for store-based retailers and place a disproportionately large burden on stores when it comes to the overall pot the government gets from business taxes.
In recent years, retailers have also cried foul given that the value of their stores has declined for the most part with business rates assessments based on a time when valuations were much higher. In some cases this has driven retailers under, with department store Beale’s, for example, having blamed a seven-figure bill for making a huge whole in its balance sheet before it went under.
Business rates raise around £25 billion a year but the Chancellor of the Exchequer, Rishi Sunak, said that while they would be retained, they’ll also be reformed.
He’s now said in Parliament: “First, we will make the business rates system fairer and timelier with more frequent revaluations every three years. The new revaluation cycle will be delivered from 2023.”
So what does retail think of that? Jace Tyrrell, Chief Executive of New West End Company, representing West End businesses, called it “encouraging” but wants more to be done.
He said: “It's encouraging to see the Chancellor finally act upon the need to reform the business rates system. Rates won’t go up this year, but they are still too high.
“A 50% discount for the retail and hospitality sectors will help some struggling high street businesses, but not all. By capping the 50% high street discount at £110,000, the benefit means little to city centre businesses. For a store in London’s West End, it will result in less than a 1% cut in their business rates bills for just one year.
“It does little in the long term to meet the government's manifesto commitment to reduce the burden of business rates.”
Jacqui Baker, RSM’s head of retail, said: "Business rate reform will be welcome news to small independents, but the £110,000 cap for larger retailers is a drop in the ocean and doesn’t go far enough to support a post-Covid recovery. Our recent research has shown that almost a quarter of retailers see business rates as the biggest barrier to growth so introducing a fairer business rates system is long overdue and waiting until 2023 to introduce more frequent revaluations is too long.”
And John Webber, Head of Business Rates at Colliers, added: “After delaying his response four times in the last year, the Chancellor has yet again missed a golden opportunity.” Calling the measures “underwhelming”, he continued: “The Chancellor has made it clear he is determined to continue to raise £25 billion from this tax and as a result his proposals only tinker with the system.”
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