Rating Experts Welcome Initiative but Doubt Its Impact Without Proper Business Rates Reform
Boris Johnson’s announcement that the £1 billion Future High Streets Fund will expand to 50 more towns, as part of the government’s plans to reshape town centres and high streets has been cautiously welcomed by rating experts at Colliers International, the global property agency and consultancy. However, unless business rates are properly reformed, Colliers believe it won’t get to the heart of the problem and in itself is not enough to counter the impact of the 2017 business rates revaluation and introduction of downward phasing.
Under the new initiative, towns such as Harlow, Barrow and Dudley will join 50 areas already shortlisted to develop plans to reinvent their high streets. The announcement comes after an additional £325 m was pledged to the Future High Street Fund last month and takes the overall size of the fund to £1 billion. The fund will be allocated to towns to improve transport and access to town centres, convert empty retail units into new homes and workplaces and invest in infrastructure.
“All very good” says John Webber, Head of Business Rates at Colliers, “but it just simply won’t go far enough and certainly won’t help retailers struggling with their current rate bills.”
Webber points out that £1 billion between 100 towns is £10 million for each town which each local authority will decide how to spend. However, there is no coherent strategy on how it should be spent, how businesses can bid/claim for support nor anything about using the money to tackle the business rates crisis. Discussions and then implementation about any serious town centre redevelopment could take months, indeed years and meanwhile high street retailers are still paying too high rate bills on their properties because of both downwards transition and a too high multiplier - and stores will still be closing as a result.
“It would be much better to get to the heart of the problem immediately” says Webber “And to use the money to remove downwards transition and reduce the multiplier now.”
Webber explains that the impact of delaying the 2015 Business Rates Revaluation by two years to 2017 meant that many retail businesses in towns such as these, were two years late in receiving a fairer (and lower) business rates revaluation, which would have substantially cut their rate bills. Government policy of implementing any business rates rises immediately, but phasing in any reductions over the four years of the list has also meant that many retailers have been and are still paying too high business rates on their property than they should be if rates had been allowed to reach their correct level on day one.
This is added to the fact that the multiplier, (the UBR figure against which the rateable value of the property is multiplied to give the final rates bill) is still too high at 50p in the pound and looks likely to move to nearer 60p with the next Revaluation. This 50 to 60% tax is and will continue to be unsustainable for most retailers on top of all their other costs. If it could be reduced to say 34 p in the £1 as it was in the 1990s, Webber argues, businesses could more easily meet their costs and more stores stay open.
Webber cites the experiences of some of his clients including high street retailers with stores in a number of these “chosen “towns. "Due to downward phasing, several will find they have spent over £10 million in their rate bills MORE than they should have done if their rates bill had been at their true levels, over the four-year period of the current list."
“And given that a quarter of their stores have rates bills at least half their rents bills, you can see the devastating impact of the Revaluation on retail. There is no doubt such costs will influence decisions such as whether or not to keep stores open and such decisions won’t really be impacted by this Government policy, however well intentioned. When you multiply that experience around other retailers in the market, you can see how large the problem is.”
“If the Government is serious about saving the high street it must abolish downwards transition and reduce the multiplier now. I hate to say it but without that, retailers in many of these towns will stay under threat, stores will be closed and jobs lost, despite all the rhetoric and well-meaning Government plans.”