Warning signs for retailers could not be flashing brighter – recent results from Next, M&S and New Look, amongst others, point to a perfect storm developing on the high street.
But the risk of any damage being done by ‘storm business rates’ could be removed by some significant announcements by Chancellor Philip Hammond in next week’s Budget.
The business rates system, if not cumbersome and bureaucratic enough, has now become so unworkable on the appeal side that only a handful of retailers across the country have been able to challenge the values that were changed – and in many cases increased significantly – from April 1, 2017.
The new Check Challenge Appeal system (CCA) is difficult and time-consuming to navigate, resulting in many retailers not making appeals.
As a result, they are potentially missing out on tens of thousands of pounds, particularly where shops are affected by material changes in circumstances (MCCs) such as roadworks or new retail developments that have affected trading and footfall.
For many retailers, the cash from successful challenges has dried up and, going into 2018, fewer and fewer appeals will be dealt with.
“Improvements to the system are not expected until April at the earliest. It is feared some retailers may not make it that far.”
Lobbying of Government has taken place and changes are promised, but improvements to the system are not expected until April at the earliest.
It is feared some retailers may not make it that far.
The Budget may offer some respite, but most Chancellors will tinker around the edges, making token gestures of small reliefs.
Maybe a change from RPI increases to the lower CPI will be introduced two years earlier than originally promised, but that is little consolation when many shops have seen 100% increases in their rateable value.
A major issue for retailers with shops in the regions is that the 2017 Rating Revaluation was supposedly the light at the end of the tunnel, with values rebased to 2015 figures rather than the pre-crash levels of 2008.
Unfortunately, the Government’s downward transition scheme means that many retailers will be still be paying rates based on these higher levels for many years to come – undoubtedly a reason for the continued high level of voids in many towns and cities.
This is something the Chancellor needs to address.
One area the Government has promised an announcement on come November 22 is their preferred option response to a discussion paper: Business rates: delivering more frequent revaluations.
The responses have not yet been published, but have been gathering dust since July 2016.
The game-changer for retailers is that the Government may announce that, in delivering more frequent revaluations, their preferred route is business rates ‘self-assessment’.
While this may not be introduced until 2022, it could be linked to an annual revaluation – and to the retail industry in particular, that could prove attractive.
“What most retailers want is a system that is certain and not complicated by reliefs that are difficult to administer and even harder to understand.”
This would be an enormous change to the current system, making it far more responsive rather than making retailers wait seven years for a rebasing of shop valuations.
What most retailers want is a system that is certain and not complicated by reliefs that are difficult to administer and even harder to understand.
They also want a rateable value that reflects up to date changes in the industry and locality.
Voices in the Liberal Democrats have called for caps in next year’s liability, which is all very admirable, but it is just a shame that when they were in power the Coalition looked the other way and thought a seven-year revaluation cycle was a good idea.
We live in hope that that Philip Hammond is not the Michael Fish of Chancellors and the storm really isn’t on its way.
John Webber is head of business rating at Colliers International