In his last budget before the outcome of the Brexit negotiations, much of the focus of Philip Hammond’s speech was on the impact that Brexit will have on the UK economy, but what did yesterday’s announcement mean for business rates?
Key Facts from the Budget 2018
– Business rates bill for retailers with a rateable value of £51,000 or less to be cut by third over two years
– Measure said to benefit 90% of independent shops, pubs and restaurants; cutting bills by up to £8,000 and totalling £900m in business rates relief
– £650m to rejuvenate High Streets
– New 100% mandatory business rates relief for all standalone lavatories made available for public use
Rob Cohen, partner in our Leeds rating team shares his thoughts:
“The outwards appearance of yesterday’s budget is a positive one for businesses with a number of seemingly favourable announcements, especially for smaller independent retailers and restaurants.
In an attempt to help businesses that are struggling with ever changing consumer habits, Hammond announced that those with rateable values of up to £51,000 will have their rates bills cut by a third over the next two years. Hammond also declared that a pot of £650m would be available for local areas to rejuvenate High Streets.
Whilst this will be a welcome announcement for independent retailers it is just papering over the cracks of the UK’s struggling high streets and these measures are not what they may first appear to be.
We have seen a number of high profile closures on the high street recently and the new retail rates relief will not benefit the likes of Debenhams, Primark, WH Smith or Waterstones that anchor our high streets; as their rateable values exceed the £51,000 threshold. Furthermore, State Aid rules mean that it is only possible to claim up to €200,000 for this type of funding over 3 consecutive fiscal years. Many of those retailers with multiple outlets who need assistance will receive little aid as a consequence and none if they have already claimed up to €200k of Government assistance. In reality, the vast majority of our main high street shops will not have their bills cut by third.
For the largest properties in towns that have seen the biggest drops in values over the last 10 years, these are still tied to rates payable from the last Rating Revaluation and a valuation date in 2008 as a consequence of the highly disadvantageous transitional caps that restrict how much bills can decrease each year. A large shop that saw its assessment half on 1 April 2017 will only be paying circa 14% less in 2019/20 than they were 3 years prior as a consequence of these caps.
It is these larger stores that the independents rely on to draw shoppers in and drive footfall and a release from downwards transitional caps that restrict the amount rates can decrease, as well as a more fundamental reform of the system are required. If measures aren’t taken to assist the big businesses soon, these most recent handouts may prove pointless”.