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NEWS STORY
BRC BUSINESS RATES VICTORY
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| March 31, 2009 |
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The Chancellor's last minute decision not to increase business rates by five per cent tomorrow (Wednesday 1 April) is good news for beleaguered retailers and a major victory for British Retail Consortium (BRC) campaigning.
Tomorrow's increase will be limited to two per cent but the remaining three per cent rise has not been scrapped. Businesses are simply being given the option of spreading it over the next two years
BRC Director General Stephen Robertson welcomed today's announcement as Government recognition that these are tough times for retailers and a good first response to BRC campaigning over the last six months. But retailers still face a £100 million increase to their bills from tomorrow and there has been no change to the overall £1.6 billion increase in business rates bills retailers face by 2010/11.
British Retail Consortium Director General Stephen Robertson said "It's come at the last minute but the Government's recognition that piling on a massive extra £250 million business rates burden in a recession would seriously harm hard-pressed retailers is welcome.
"With RPI inflation at zero, and expected to turn negative later this year, a five per cent increase was unjustifiable.
"Allowing businesses to postpone the extra costs from ending the phasing in of the 2005 revaluation scheme will be particularly helpful for smaller retailers. Many were struggling to prepare for a painful hit from increases over and above the basic five per cent planned.
"But the Chancellor has only taken a first step. The timing has changed but the eventual costs haven't. He still plans business rates increases totalling £1.6 billion by 2010/11, that's thirty per cent more.
"The Government must reintroduce empty property rates relief and remove the serious threats that remain from the impact of 2010 revaluation and Business Rates Supplements."
Ahead of the Budget, the British Retail Consortium (BRC) is meeting the Government tomorrow (Wednesday) to discuss the next moves.
BRC research shows that annual increases in business rates, business rates revaluation, loss of empty property relief and business rates supplements will still add £1.6 billion to the £5.45 billion retailers paid in business rates in 2007/2008. This is equivalent to the average salaries of over 100,000 retail employees.
Notes to Editors
The Government had estimated the planned five per cent increase in business rates bills would take another £1 billion from all businesses. Because they use more property than other business sectors, retailers pay 25 per cent of business rates despite representing only 8 per cent of Gross Domestic Product.
The £1.6 billion increase in, Government-imposed, retail property costs comprises:
Empty Property Rate Relief – abolished in April 2008. Even allowing for the temporary increase in the threshold at which empty property becomes liable for business rates announced in the 2008 Pre-Budget Report, this will cost retailers £115m a year.
The Government should use the powers it has to reintroduce 50 per cent relief to respond to prevailing market conditions.
Business Rates Multiplier – in normal circumstances business rates are increased each year in line with the previous September's RPI inflation. Last September RPI was five per cent, an unrepresentative seventeen-year high. Retailers would have been forced to pay out an extra £250 million a year from today 1 April 2009 on top of the £210 million added to their business rates bills in the last financial year. Retailers still face this £250 million bill but can defer some of it over the next two years.
Business Rates Revaluation - using April 2008 rental values as a basis for business rates from April 2010 is unjust. The property market has entered uncharted territory since April last year with unknown variations between different localities and business property types.
Revaluation now will produce great unfairness. This will cost retailers an extra £900 million in 2010/11.
The Government should immediately announce it will postpone revaluation until stability returns to the property market.
Business Rate Supplements – local authorities are to be given the power, from April 2010, to charge businesses a supplement on top of their existing business rates bills. Nationally this could cost retailers an extra £160 million a year.
Government must ensure safeguards are in place, including a compulsory business vote, before any new Business Rate Supplement is introduced.
The BRC's report Rates Debate: A fair deal for retail is available from the BRC Press Office.
Media Contacts: BRC Press Office 020 7854 8924 Out of hours 07921 605544
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