Crippling rates bills have helped put the boot into Toys R Us, the troubled retailer, according to Colliers International, the commercial real estate agency and consultancy. The retailer, which according to current news reports is preparing to close a quarter of its 106 stores across the country with the loss of hundreds of jobs, could have saved over £17 million had the business rates revaluation gone ahead as planned in 2015.

However due to postponement and the effect of the Government’s transitional rate scheme, the company has been saddled with big bills -  a rates bill of over £22 million alone in 2017.

“Toys R Us is, like so many other physical retailers facing financial pain at the moment, and the current rating system is a further drain.” said John Webber Head of Business Rating at Colliers International, “Such retailers are competing against the internet providers such as Amazon, who do not pay such rates on stores.  And Government policy has not helped. The Budget gave retailers little relief- moving from RPI to CPI rate rises still means a 3% rise on business rates next year (around a  £200 million increase)  and some retail stores just can’t take this right now. “

According to Webber, the Government decision to delay the 2015 revaluation to 2017 meant thousands of retailers nationwide had a two-year delay in receiving the reduction in their business rates bills, impacting on their bottom line.  Also, many – including around 75% per cent of Toys R Us stores – which should have actually seen relief from the 2017 Rating Revaluation are not yet seeing the benefits. The policy of phasing in reductions, whereby it takes five years of "transition" until businesses in England are allowed to pay their business rate bills at the new revalued levels, has meant many companies such as Toys R Us, have still been paying much more than expected.

John Webber, Head of Rating, Colliers International, said, "The government decision to delay the business rates revaluation in 2015, certainly has had an impact on Toys R Us. By delaying businesses rates reaching their true levels, the stores in some parts of the country have been forced to pay for the better ones for far too long in terms of business rates."

Taking a particular store as an example, such as Exeter, Webber points out that the rates bill of around £340,000 in 2016/17 should have been reduced to around £225,000 following the revaluation, a decrease of around 34%. But because of phasing, reductions have only been a small percent this year and next. Colliers has calculated the business therefore will overpay in excess of £800,000 in business rates on that store alone, than it should have done if the revaluation had occurred in 2015 and any reduction in liability implemented immediately, as opposed to being phased.

"That's a lot of Barbies to sell. " says Webber.

Webber concluded, "The current business rates regime has done nothing to stimulate healthy retailers and only seems to be adding to the problem. Given the uncertainty of Brexit, along with rises in the NLW, apprenticeship levy  and the fall in sterling, many retail businesses are feeling increasingly vulnerable. The Government needs to be more supportive of retail and properly reform the system now. "

Colliers is still campaigning for genuine business rates reform including the need to offer more funding to the Valuation Office Agency (VOA) so it can deal with the estimated 200,000 outstanding business rates appeals in the system.

Colliers Manifesto for Business Rates Reform:

1.     Increase funding for VOA in order to deal with existing appeals’ backlog;

2.     Release VOA from pressure exerted by local councils and HM Treasury;

3.     Introduce a register of appeals professionals – removing the ‘cowboy’ element;

4.     Root and branch reform of current business rates exemptions and reliefs.