The dramatic fall in rents over the past five years has put into sharp focus how out of kilter onerous business rates increases are with the market, according to new data revealed by the Grimsey Review.
Shop rents across the UK have tumbled 8.5% over the past five years, according to research by Colliers for the Grimsey Review, the alternative analysis of the high street led by the former Focus and Wickes chief executive.
Average Zone A shop rents per sq ft in the UK have dropped from £131.40 to £120.20. However, Zone A rents in London have continued to grow, up 11.3% over the five years to £229.80. This compares with average rents across England, which plummeted 20.6%, excluding London.
The Grimsey Review has also calculated that business rates have risen at almost twice the rate of store sales. Data from financial risk management analyst Company Watch showed retail revenue, excluding online sales, has increased 11.4% over the past five years, while the Government’s business rates yield, across all sectors, has soared 22.5%. Retailers pay a disproportionately high amount of the overall business rates bill.
Bill Grimsey, who is leading the review, said when business rate hikes were put into context alongside falling shop rents it was “easy to understand why bricks-and-mortar retailers are angry”.
Retailers could be hit by almost £300m in extra business rates next year, Retail-week.com revealed last week.
The BRC calculated that September’s retail price index measure of inflation, which business rates are based on, could rise by 3.3%, adding £294m to retailers’ rates bills come April next year.
Independent retailer Paul Turner-Mitchell, who is helping compile the Grimsey review, said: “We’re looking at deep structural changes that have seen market rents for much of the retail sector fall. Yet the business rates net yield has risen and accordingly there is now a fundamental arbitrage differential which is highly damaging.”
The Grimsey Review, an alternative to Mary Portas’ Government-backed review in 2011, will be published on September 4 at a parliamentary reception.