Rating experts hope Conservatives will use its 80 majority to bring in further fundamental reform and grapple with the key issues impacting the high street.
London, December 19th 2019 Whilst it’s been good to see the new Conservative Government commit to carry out its pledges to support the NHS today, its proposals for the high street still have some way to go to hit the mark, says John Webber, Head of Business Rates at Colliers International.
"The Government's recognition that they will commit to conducting a further review of business rates is good news” says Webber, "as is the confirmation of the 2021 Revaluation and a move to 3-yearly revaluations. However, without further fundamental reform, and in particular an end to downwards transition, such changes will be meaningless in saving the High Street."
The Conservatives have promised to halve the business rates of struggling high street shops including restaurants, hairdressers, and pubs, hiking the current discount of 33% on current rates payable to a new 50% discount in the next financial year. Nine out of 10 independent firms will qualify for the relief, which is eligible to retailers with a rateable value below £51,000 – giving them a saving of up to £12,500 in total.
For the first time, independent cinemas and music venues will also qualify, in a bid to safeguard local entertainment and a current £1,500 relief for local newspapers will also be extended by another year, to help keep 150 titles going.
“All this sounds well and good” says Webber, “but it does nothing to stave off the real problem with the high street - the struggling bigger retailers who carry the bulk of the business rates burden and have been the ones closing stores and making redundancies in the last few years”.
"With a majority of 80 seats, the Government really has a chance to do something radical and not just piecemeal vote winning tinkering, so I really do hope it does so."
According to the Centre for Retail Research, in 2019 alone, 38 retailers have entered into CVA to the end of November, resulting in 1663 store closures and impacting on 43,000 jobs. This was on top of the 46,000 employees affected in 2018.
Retailers pay an in-proportionate slice of the UK’s £26 billion business rates bill and this year are expected to pay in the range of around £7.625 billion. This burden is based on the size and value of their properties, no matter how well their businesses are doing. The biggest burden has been on many of the large high street chains who, already suffering from the competition of in-line sales and subdued consumer confidence, have been hit hard by business rates that are still far too high, due to downwards transition. “Given where we are in the rental cycle- its rates as opposed to rents which the big retailers are screaming about now!”
Webber continued, “The Conservative proposals do not support the larger retailers and to be honest even if they tried to do more by way of reliefs, they would be hampered by current EU State Aid rules since the EU has placed a cap of Euros 200,000 over a three-year period on State Aid for any company in the European Union"
“Bigger businesses are therefore missing out. Many of our clients would currently be eligible for relief on their business rate bills given the amount they pay and the state of their finances, but EU State Aid provisions make it very difficult for companies to claim the reliefs they need to keep their businesses moving forward.”
And given the UK Government has said it will import EU State Aid rules and have them administered by the Competition and Market Authority, even if we left the EU, unless this policy changes, the bigger struggling retailers will still be largely on their own- which is why the reliefs route does not work and we need fundamental reform."
Webber concludes, “I have said it before and I will say again- the Conservatives, when in government, commissioned the Treasury Select Committee to hear and analyse in some detail, both verbal as well as 140 written representations from businesses impacted by business rates tax. In November, the TSC gave some very clear recommendations on what should be done: reduce the multiplier, reform the appeals system and simplify reliefs. With a majority of 80, Boris Johnson's Government now has a real chance to implement these recommendations.
Let's hope this time the Government listens and take drastic action to mend what is a broken system, and not just add some sticking plaster around the edges. With such a majority, there really is, this time, no excuse to do otherwise."