With the publication of the Draft List for the 2023 Revaluation, John Webber of Colliers assesses who are the winners and losers and urges businesses to check their new rateable value (RV), as they still have it all to play for.
The Government’s draft rating list for the 2023 Revaluation, published hot on the heels of the Autumn Budget reveals that UK retailers are the biggest winners from the new list. Operators of large warehouses and logistics/distribution space will see the biggest jump in their rates bills when the new Revaluation comes into force next April. But according to John Webber, Head of Business Rates at Colliers, there are still large discrepancies on the List, with the result many companies should think carefully about approaching the Valuation Office Agency (VOA) before the list becomes live on 1 April 2023.
Winners – Retailers
The retail sector on average has seen a 10% decrease in RV in the next list- the only sector to show a decrease. Together with the decision to freeze the multiplier at 51.2p for large businesses and 49.9p for smaller businesses, this is good news for retailers, as many will see a reduction in their rates liability in April.
This news has been enhanced by the removal of Downwards Transition, as announced in the Autumn Statement – since it means retail occupiers will pay the true lower rates payable for their stores immediately from when the new list starts.
According to John Webber “We are expecting to see substantial business rates bills reductions across England and Wales, not just on high street locations but in retail parks, shopping centres and other out of town locations.”
The 10% decrease in RVs is an average and in some locations, RV reductions of 30% or 40% are expected.
Large department stores and hypermarkets are among the biggest winners of the revaluation, for example on Oxford Street in London, RVs have fallen by approximately 30%. Some stores, such as Selfridges has seen its RV drop 45% from £30.5 million to £16.8 million with the new list. In nearby Knightsbridge, Harrods has seen an RV reduction from £32.7 million to 16.8 million. The annual rates liability for these stores will correspondingly drop from £8.6 million and £9.2 million a year respectively.
As shown in the table below, other major shopping destinations across England and Wales will also see substantial reductions in RV, which will be reflected in rates bills in April.
|Oxford St, London||Between 25%-30% decrease|
|Bull Ring, Birmingham||Up to 40% decrease|
|Manchester Arndale||34% decrease|
|Broadmead, Bristol||Up to 44% decrease|
|Northumberland, Newcastle||Up to 36% decrease|
|St David's Cardiff, Wales||20% decrease|
Elsewhere in many towns and cities in the North, there have been even larger falls in values. On Market Street in Barnsley Town Centre values have fallen by 47% on this new rating list.
Webber continued, “Rates bills are not the only economic pressure on retailers, particularly with the energy crisis, rising service charges and staffing costs, but by freezing the multiplier and removing downwards transition, it will allow rates bills to fairly reflect rents. If a retail business fails in 2023 or beyond, it is unlikely to be because of business rates.”
Losers – Logistics
The industrial and logistics sector has certainly been hit the hardest in this new revaluation, reflecting the higher rents agreed in this sector at the time of the antecedent valuation date in April 2021 (as industrial take up figures rose across large areas across the country). As a result of this, there has been an increase in the RVs for many industrial properties, with the VOA confirming the industrial sector showed an average 27.1% increase in RV, the largest increase of all sectors.
Earlier in the year, Colliers predicted a rise across the full sector averaging between 20% and 30% and the most prime stock rising even higher to 50%. It looks as though our predictions have come true.
In the table below we have provided examples of where the RVs have increased on some of the highest quality industrial and distribution space in the country.
|Park Royal, London||30% increase|
|The Fort Industrial, Birmingham||27% increase|
|Trafford Park, Manchester||Up to 30% increase|
|Vertex Business Park, Bristol||Up to 48% increase|
|Washing, Newcastle||33% increase|
|Wrexham Industrial Estate, Wales||33% increase|
|Wakefield Europort, Leeds||Up to 45% increase|
|Doncaster Iport||Up to 37% increase|
Some are even higher - the rateable value of Amazon’s warehouse at Tilbury in Essex for example has risen by 74% to £12.3 million.
However, it’s not all doom and gloom for the logistics sector. In the Autumn statement the Chancellor announced upward transitional relief caps to support ratepayers facing large bill increases following the revaluation, with £1.6 billion of support funded by the Exchequer. This will spread out the increases for the big logistics facilities. The introduction of upward caps of 5%,15% and 30% for small, medium and large properties in 2023-24 will also reduce the pain and will be applied before any other reliefs or supplement.
Occupiers of industrial and logistics properties will therefore receive some sort of cushion. As Webber comments, “Many occupiers of these properties were aware they had been paying too little for too long in terms of business rates, particularly given the extension of the list to six years and have been preparing to see substantial rises. Now businesses in the sector have certainty to plan for the year ahead.”
In general, RVs have risen in the office sector but not to the same extent as the industrial sector. RVs adopted on city centre offices have, in the main, increased across the country, with the levels of increase varying depending on the location. Prime offices have shown the greatest rises. For some offices, situated in more secondary locations and of Grade B specification, RVs have either remained the same or seen only small increase. Again this will vary from location to location.
The table below shows some of the rises in prime city centre stock across England and Wales.
|Fenchurch St, London||21% increase|
|Colmore Row, Birmingham||Up to 14% increase|
|St Peter's Sq, Manchester M2 3AA||5% increase|
|One, Glass Wharf, Bristol||5% increase|
|Central Square, Newcastle||8% increase|
|Fusion Point 2, Cardiff||11% increase|
|Wellington Place, Leeds||26% increase|
Going Forward – Appealing against assessment – two tier system
The headline figures revealed are obviously averages and there still is a lot of discrepancy in the list. Fortnum and Masons’ office in Piccadilly, London for example has only seen a 5% reduction in its RV, which seems suspiciously low.
As John Webber continued, “What is becoming obvious is that those occupiers and owners of properties that either themselves, or via agents, made representation to the VOA during the assessment process appear to have been more successful in negotiating their bills down. Given the VOA was assessing properties in the midst of COVID when many properties were temporarily closed, or deals were being struck with landlords, a proper assessment was something of a minefield.
“We therefore urge anyone who is unhappy about their RVs to consider making representation to the VOA now if the figures look significantly wrong and consider the appeal process when the list becomes live next April. We believe this will lead to even further reductions in RVs, particularly in the retail sector and could provide some respite in offices too.”
So, what now?
According to Colliers, overall, the Government’s decision to freeze the multiplier, abolish downward transition and cap the largest rate bill increases is to be complimented. As John Webber said, “It is a massive relief that the Government finally listened to us and other industry bodies about out-of-control business rates rises following the next valuation. By freezing the multiplier and removing downwards transition it has at last recognised that the business rates system cannot be revenue neutral without causing significant hardship.”
“However,” he warns, “…there is still massive need for overall reform- to the reliefs system, to appeals to empty rates, to using the rates system to incentivise investment in sustainability. We hope the Chancellor follows through on his earlier pledge to look at the system as a whole.
“The Government also needs to stick to its manifesto commitment of reducing the overall burden of business rates and I read in trepidation in the OBR report that the Government is now forecasting that income from business rates is expected to rise to £36 billion by 2027 (from £2.5 billion in 2022/23), which appears contrary to this pledge.
“There is still everything to play for and we will be at the forefront in negotiating with the VOA and the Government for both our clients and UK businesses in general.”