Having been one of the most hotly-debated economic topics in recent years, companies throughout the UK could be rejoicing or commiserating after predicted changes to local business rates.
British high streets in areas such as Rochester will actually benefit
After the British government announced plans to launch a review of the business rates system in March 2016, a later postponement of such a development left many feeling the powers that be did not sufficiently understand the pressure felt by business owners.
Indeed, in the run up to the general election in May, opposition parties, and in particular Labour, made business rates a big part of manifestos and business pledges. Former shadow business secretary Chuka Umunna declared that business owners have been “clobbered” by hikes in business rates and that a cutting, and then freezing, of business rates was necessary.
In the Summer Budget in July and Autumn Statement in December we heard little to nothing when it came to business rates – the government instead focusing on things like apprenticeships, corporation tax and the wider economy.
Now, however, new research has suggested businesses are “sleep walking” into major business rates changes that are going on below the surface.
Despite January 2016 being the mark when the government will have finished assessing three-quarters of properties for new business rates, each will not know the results until October 2016.
As such, it will come as a surprise to the 76 main towns and shopping centres that are predicted to experience an increase to business rates. Furthermore, parts of London could see a hike of more than 400 per cent.
To combat the surges some parts of the UK will experience, Colliers International research suggested the Midlands, North of England and Wales will benefit from business rates decreases.
Showing the extent of the changes, Dover Street, a shopping street in the capital home to brands such as Victoria Beckham, could witness a rate increase from around £80,000 to nearly £400,000 by 2017.
Alongside the swanky shopping and entertainment street, Brixton at 128 per cent and Fulham at 187 per cent will also be hit particularly hard.
John Webber, head of rating at Colliers International, said: “The 2017 rating revaluation will produce the largest changes to business rates for high street retailers in a generation. We now understand that the bulk of assessments have been made and local councils are very nervous about widespread reductions in business rates revenue.
“Our message is clear: retailers need to start planning for these changes. Retailers in London and the South East will, in some cases, face significant rate rises. Budgeting to allow for this should be addressed now and we hope that our data serves as a wake-up call a clear 12 months before the government publishes the final details. For retailers who are considering closing unprofitable shops in the North and the Midlands, this report should be good news with likely rates’ cuts only round the corner.
“For retailers who can expect a reduction in business rates, it’s important to be clear about rate liability. This knowledge offers leverage for both landlord and tenant when it comes to rent negotiations. Retailers who could be sleep walking into rates changes are threatening the sustainability of their stores. We strongly urge them to wake up and act to protect their shops and the jobs which rely upon them.”
Britain's current system has been widely criticised because of the way that rates are charged to retailers based on the value of the company's shop or other commercial property, rather than turnover or profit. Business rates bring in around £25bn annually to the Treasury, but retailers argue that they are not closely related enough to actual profitability and say the system gives online retailers an unfair advantage.
Earlier in 2015, Real Business heard from Askar Sheibani, CEO and founder of telecoms repair and support company Comtek, that his business was paying thirty times more for business rates in the UK than it was for other operations in the UK.
“While the government has taken steps to lower the business rates for some organisations, such as those adhering to specific criteria and located in Enterprise Zones, the it must overhaul the entire process. Instead of basing the rates calculation on property value, more focus should be placed on profitability and performance, so as to encourage, rather than hamper, business growth.”
So, which areas are likely to be raising a glass and which will be drowning their sorrows?
Top 10 UK winners with business rates reductions:
Newport: 80 per cent reduction
Port Talbot: 64 per cent reduction
Tamworth: 56 per cent reduction
Neath: 56 per cent reduction
Ealing: 46 per cent reduction
Torquay: 45 per cent reduction
Pontypridd: 44 per cent reduction
Dewsbury: 43 per cent reduction
Llanelli: 43 per cent reduction
Kidderminster: 42 per cent reduction
Central London – Biggest increases
Jermyn Street: 133 per cent increase
James Street: 72 per cent increase
Strand: 93 per cent increase
New Bond Street: 69 per cent increase
Old Bond Street: 169 per cent increase
Coventry Street: 186 per cent increase
Leicester Square: 239 per cent increase
Marylebone High Street: 146 per cent increase
Redchurch Street: 131 per cent increase
Bishopsgate: 181 per cent increase
Dover Street: 415 per cent increase
Outer London – Biggest increases
Putney: 12 per cent increase
Clapham Junction: 78 per cent increase
Hammersmith: 89 per cent increase
Islington: 53 per cent increase
Hampstead: 29 per cent increase
Wandsworth: 67 per cent increase
Camden: 10 per cent increase
Westfield London: 102 per cent increase
Brixton: 128 per cent increase
Southall: 91 per cent increase