The Government’s decision to postpone the revaluation of business rates from 2015 to 2017 will create a ‘toxic cocktail’ for UK hospitality businesses and is a ‘further blow to the country’s struggling high streets’, according to industry experts.
Yesterday’s announcement will mean restaurants, hotels and pubs will continue to pay business rates based on top-of-the-market 2008 rents for a further two years.
The original 2015 revaluation would have seen business rates calculated at 2013 rentable values. Under the Government’s new plans, the 2017 change will be calculated at 2015 rentable values, which are likely to be even higher than 2013.
“Economic conditions are extremely tough out there,” said Mark Rigby, chief executive of the UK’s largest business rates specialist CVS. “Extending the current charging regime until 2017 – nine years after rateable values were last measured – is unjustifiable and is simply heaping pain upon pain for businesses crying out for some respite from government.
“Low consumer spending, high property rents and rising overheads like energy bills and staff costs are making trading conditions hard enough on the high street and right across business. Today’s announcement simply creates a toxic cocktail which is going to be very hard for thousands of businesses to swallow and survive.”
Out of date
“No business could get away with charging prices that are so many years out of date. Struggling firms shouldn’t have to take it from the government, yet they are being required to do so. It’s not what businesses need right now and, frankly, they deserve better. As an announcement, it thoroughly flies in the face of pro-business claims from government”
The Parliamentary under-secretary of state for communities and local government, Brandon Lewis, claimed the decision avoids ‘local firms and local shops facing unexpected hikes in their business rate bills over the next five years’.
He added: “As business rates are linked to inflation, there will be no real terms increase in rates over this period. This reform will provide certainty for business to plan and invest, supporting local economic growth.”
But the British Property Federation (BPF) has also criticised the move, arguing that a 2015 revaluation would have been necessary to enable business rates to be ‘readjusted downwards in line with today’s economic situation’.
'Worst possible time'
BPF chief executive Liz Peace said: “A revaluation should shift the burden from those who are suffering to those who are prospering. The postponement embeds injustices in the current system, where businesses pay top of the market rates in a depressed climate, for an additional two years at the worst possible time.
“With technological and other advances, arguably we should be valuing more frequently, not less. That way, business are paying rates that closer reflect their circumstances.”
Brigid Simmonds, chief executive of the British Beer & Pub Association (BBPA), which held its Annual Dinner on Wednesday evening, added that the delay will ‘come as bad news for many pubs which were relying on the revaluation to reduce business rates because their turnover had dropped'.
“The revaluation is an opportunity to get a fairer rates bill, so any delay is very unwelcome,” said Simmonds. “If we are going to see more time passing between rate revaluations, then it makes the reintroduction of Section 20c (of the Local Government Finance Act) all the more important. This would allow pubs to appeal annually, where their levels of trade have since dropped, offering an immediate rebate.”
“I have already mentioned Section 20 when I met the new pubs minister, Brandon Lewis, in Birmingham and will raise it again at my next more formal meeting. It is very important to try to get the Government to act on the issue.”
Business rates revelations
Business rates and rates appeals have been the subject of great debate and controversy for the hospitality industry in recent months.
- Late last year the chief executives of the UK’s pub, hotel, restaurant and leisure industry trade bodies hit back at the huge hikes in business rates which came in to effect in April year, in a letter to cabinet ministers Eric Pickles and Vince Cable.
- It was also recently reported that delays in processing business rate appeals are costing hotels in England over £13m per year, according to research from CVS.
- The business rates specialist also pointed out that many independent hotel owners could actually be in line for rebates on their business rates bills worth tens of thousands of pounds due to the impact of the recession.