Rates System in Need of Change to Help Retailers Invest

In recent weeks, the Chancellor has come under fire from all sides over the impact of the business rates revaluation, with many claiming that the impact on their businesses could be catastrophic. In the convenience sector, as with many others, the reality is that there will be both winners and losers when the new rates take effect in April. The government is right to say that thousands of businesses will be taken out of paying rates altogether due to the 100% relief given to businesses in England with a rateable value of under £12,000, and for many of our smaller members this is welcome relief. Additionally, the transitional rate reliefs put in place for those who are set to see significant increases in their bills will lessen the initial blow in April.

But while it would be wrong to depict the rates revaluation and recent government action as universally bad for business, the current media frenzy is a result of longer term problems with the system that the government has allowed to fester.  It may be tempting next week for the Chancellor to give some short term tactical help to some of the affected businesses, and we hope that he does, but unless he commits to addressing the fundamental issues that make the business rates system unfair and perverse, we’re just going to be back here rehearsing the same arguments every time we approach his Autumn budget, or when new rates bills hit the doormat every April.  It’s time to address these problems head on.

For me, the biggest problem with the current business rates system is that it acts as a barrier to investment. Over the last year, the convenience sector alone has invested over £800 million in improving stores and expanding the number and quality of features and services offered to customers, and other sectors will be investing in their businesses too. This investment is crucial in ensuring that businesses remain competitive, and it’s these thousands of small investments taking place in every community across the country that keep the economy ticking.   Yet these investments, through the eyes of the VOA, increase the value of the property, which in turn puts up business rates bills for the retailer. We believe that this needs to be flipped around, so that the rates system actively incentivises investment rather than, in the case of some members contacting us, doubling the rates bills of progressive businesses.

We have heard a lot about the disparity in rates bills for certain business sectors.  For example, many of Amazon's giant distribution warehouses will benefit from a fall in their rateable values, while some high street bookshops see their rates rise.   In our sector, petrol forecourts are seeing far bigger increases in their rates due to paying on the basis of turnover not rental values.  I’m not sure we’ll ever arrive at a consensus about what is fair for all businesses, but some of these glaring inequities can be addressed.  If we have separate schemes for forecourts, and indeed for pubs and free-to-use cash machines, then why not for internet distribution facilities?   This is why we need a full review of all the separate schemes used to calculate rates in different sectors.  Are they fit for purpose, fair, and relevant?  Given the amount of change in the past couple of decades, it’s hardly surprising that these schemes already look outdated.

Of course I hope to hear some good news for convenience stores on Wednesday.  The re-instatement of the retail rate relief scheme, more transitional relief for businesses seeing big rates rises, and retention of businesses’ rights to appeal their rates bills would all be welcome moves.  More than any of this, I hope the Chancellor has stepped back, has listened to the very real concerns aired in recent weeks, and has understood why the current system damages businesses, high streets, consumers and the economy.  If he has, he will take steps to ensure that the business rates system is relevant to the future, not just a relic of the past.

This piece first appeared in the Grocer on March 3rd 2017

This entry was posted by Chris on Mon, 06/03/2017 - 11:38