Partner Article

Revaluation of business rates holding back the high street

In light of recent announcements from CRR that one in five shops could close by 2018 we look at how the delay in the revaluation of business rates is holding back the high street.

The Centre for Retail Research recently published an analysis of how retail will have changed by 2018.

The Retail Futures 2018 forecasts that by 2018 a further 164 major or medium-sized companies will have gone into administration, involving the loss of just over 22,000 stores and 140,000 employees.

The analysis also forecast that the share of online retail sales will rise from 12.7% in 2012 to 21.5% by 2018 resulting in around 41% of town centres losing over 27,000 stores over the next five years.

These dark forecasts are in part attributed to the fact that consumer spending has increased by 12% since 2006 but has been outstripped by retail operating costs, including rates, which have risen by 20%.

Business rates is a controversial topic at the moment and has become a major stumbling block that is squeezing existing tenants and preventing prospective tenants from taking on an empty premises. Business rates are fast becoming the biggest cost for retailers being significantly higher than utility bills and staffing costs.

In desperate attempts to retain tenants and keep the high streets alive, despite many landlords showing increasing leniency with rents, the rates burden is proving to be crippling.

Rateable Values were last set in 2010 and were based on property values from 2008 before the crash and significant growth of internet shopping. Traditionally a revaluation takes place every five years with the next revaluation supposed to take place in 2015 - the government however is delaying this by two years “to give certainty”.

In many regional centres the only certainty is rates burden increasing at the expense of the health of the High Street.

This delay has had many up in arms, particularly the Distressed Retail Property Taskforce (The task force was set up in 2012 to help tackle the problems of rundown high streets). Mark Williams, chairman of the taskforce made clear his views which are echoed by many including the British Council of Shopping Centres and the British Property Federation. They all believe that the current levels of business rates are contributing to an uneven playing field.

The main belief is that poorer, more distressed areas are subsidizing more affluent areas.

Many high street retailers are struggling and unfortunately having to pay rates that in no way reflect their circumstances or the current value of the property they occupy which is causing much distress.

The postponement of the revaluation could well be fatal for many retailers and should the forecasts of the Retail Futures 2018 analysis come to pass then we really are looking at a looming crisis. The Coalition pay lip service to improving our High Streets by backing Mary Portas whilst actively increasing the problem with it’s Business Rates policy.

This was posted in Bdaily's Members' News section by Hitchcock Wright and Partners .