Concern grows over business rates

26/January/2012

The British Property Federation is the latest in a growing list of voices calling on the government to cap the annual business rates increase at two per cent to help struggling firms.

In response to the Association of Convenience Stores' (ACS) campaign to cap business rates increase at two per cent, the BPF reiterated its support for the ceiling, which it first proposed in its response to Mary Portas' review of the high street.

Both bodies are concerned about the damage caused by linking business rates to retail price index figures.

Annual business rates increases are based on RPI from the previous September.

With RPI at unusually high levels in 2011, retailers are facing significantly increased rates bill despite forecasts suggesting inflation will have fallen by the time rates are affected.

Separate IPD data on standard shop rents shows that while inflation has risen by 94 per cent since 1989, rents for standard shops have only risen by 24 per cent, and in real terms have fallen by 37 per cent.

"This damaging business rate hike will come at a time when retailers are fighting for their very survival," said Ian Fletcher, director of policy at the BPF.

"2012 has already seen several high street names either restructure or enter into administration."

"Linking business rates to RPI has meant they have doubled over the last 20 years and government should provide greater certainty for businesses by fixing the business rate uplift each year, which we have suggested should be at the rate of the inflation target, currently two per cent."

ACS chief executive James Lowman welcomed the chancellor's decision to defer part of the business rate increase for two years in November’s Autumn Statement, but warned: "Deferral schemes have been implemented twice in three years by consecutive governments after increases topped five per cent, illustrating the need for a fairer system of setting business rates."

ACS is urging retailers to write to their MPs and encourage them to lobby George Osborne to set rates in accordance with the government’s own inflation targets.

"This would save the retail sector over £200 million this year and allow local shops and high street stores to focus on sustaining and growing their business."

Business rates is a local tax that is paid by the occupiers of all non-domestic and business property in England and Wales.

Rates are set by central government but collected by local authorities.