Business rates have become something of a bugbear for firms of all sizes and George Osborne’s postponement of the expected overhaul until next year has caused further frustration. Now, new research has revealed which of the UK’s towns should brace themselves for further pain, with rates set to soar in 76 of Britain’s main towns and shopping centres.
There is good news on the horizon for many of the UK’s retail centres though – around 324 should see a decrease in rates, while 21 will pay the same amount. Property consultant Colliers International looked into how the rating revaluation will impact high street retailers, from analysis of rental data from 2010 to 2015, and found it could actually make strides in terms of the north-south divide. Those areas which stand to benefit are predominantly in the Midlands and north of England, while Newport in south Wales could see bills drop by around 80%.
The last business rates revaluation was in 2010 and while they are usually revisited every five years, the expected 2015 revaluation was delayed until 2017. The government’s consultation into reform of business rates was closed in June and it had earlier promised to announce a decision by the end of the year, but Osborne also pushed this back to 2016.
The property-based tax has been an ongoing headache for retailers and with the rise in rates expected alongside additional costs of the new living wage and the apprenticeship levy, the British Retail Consortium claimed retailers would be looking at having to find an extra £14bn over the next five years.
‘The business rates losers are found only in London and the South East and it could turn highly profitable stores, including independent retailers, into failing businesses,’ said John Webber, ratings expert at Colliers International, who feels many could be in for an unexpected shock when rates change in 2018.
The significant regional variations flagged up by the analysis saw Marlow for example, facing an increase of 58% in rateable value, Guildford up 42% and a rise of 18.5% expected for Brighton. Places such as Rochdale in Greater Manchester should see some relief with an expected decrease of 30%, while Kidderminster’s rates in the West Midlands are predicted to drop 42%.
The boutique retailers of Dover Street might want to look away now – those based in the Mayfair hotspot can expect to see a staggering increase of 415%. Dover Street Market, the six-floor multi-brand store, designed by Comme des Garçons' Rei Kawakubo, helped establish the area as a retail haven, and pulled in £13.2m in sales last year, but this latest news won't be welcome for the designers hosted there.
Brixton doesn’t fare much better either, with a potential 128% increase in rateable value. East London still remains a popular haunt and retailers in areas such as Redchurch Street and Spitalfields may have cause for concern about being priced out, with rates expected to rise 361% and 169% respectively. Ealing was a rare London example where rates could fall, with the research predicting a cut of 46%.
‘The 2017 rating revaluation will produce the largest changes to business rates for high street retailers in a generation,’ Webber said. ‘We now understand that the bulk of assessments have been made and local councils are very nervous about widespread reductions in business rates revenue.’
While retailers await the government's final details next year, it's likely some businesses in the capital will need to think about contingency plans. This latest prediction will no doubt add further fuel to the fire of retailers' claim that the system always creates winners and losers, and stir up more debate as to just how much of a threat the current business rates system is to the diversity of the UK's high streets.
The infrequency of reviews has been a pain for many shops – changing property values has meant many feel their rates exceed their rental payments. The trouble remains though, in setting out how a substantial revamp would work. Business rates brought in £27.3bn this year and this is predicted to reach £32.4bn by 2020, so the Treasury will have a headache of its own in finding an alternative which doesn't hugely compromise this.