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News - 27 September 2009

Retailers need more help with disproportionate rates

The British Retail Consortium (BRC) claims that the Government’s plans for cushioning the effects of next April’s Business Rates increase do not go far enough. The increase will leave retailers forking out £5.83 billion of England’s £23.44 billion total business rates revenue.

Responding to the Department for Communities and Local Government’s consultation on Transitional Arrangements for England the BRC said the Government was right on the scheme’s duration and right on how to pay for it but wrong to expect it to balance its books within each year.

The rateable value of all England’s business premises has been reassessed based on property values on 1 April 2008. The Business Rates bills companies face from April 2010 will be the first based on this revaluation.

Some will see their bills rise as a result of revaluation, others will see them fall. Transitional Arrangements are intended to smooth-out the effects of the revaluation for those businesses worst affected. For example, without transition, supermarkets are expected to face an average 12% increase in their business rates bills. There are also large regional disparities in business rates bills with retailers in the South West and London facing the biggest increases.

In its response to the consultation, the BRC says the Government is right to suggest capping the increases and meeting the cost of that by also capping the benefits for those businesses whose bills will fall. This is fairer than financing the capping by a general supplement on all beneficiaries.

It is also right to plan to run the Transitional Arrangements for the full five years until the next business rates revaluation.

But, against a background of the toughest trading conditions for years and falling shop prices, the Government should be capping business rates rises at 5% in the first year. Instead it is still prepared to allow rises as high as 12.5% in year one and up to 25% in years four and five.

And insisting the scheme is revenue-neutral within each year, rather than simply across its five-year life, will limit its ability to help hard-pressed retailers at the time when they most need it.

Tom Ironside, British Retail Consortium Director of Business Environment said, “Property is one of retailers’ biggest costs. Shops have to be all over the country, near where people live. That leaves retailers paying a quarter of all business rates despite making-up 8% of GDP. In some of the toughest trading conditions seen in years, a scheme that regards a twelve per cent hike in retailers’ rates bills as OK isn’t doing its job.

“At a time when shop price deflation has arrived, piling costs like these onto retailers is a direct threat to their ability to maintain and create jobs. Retailers need to be cushioned from the worst effects of revaluation on their business rates bills.

“The Government has got some key elements of the arrangements right but it needs to ensure it can deliver enough help to retailers at the time it is most needed.”


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