The Chancellor must freeze the business rates multiplier for all sizes of businesses when he gives his Autumn Statement this week, or the High Street will be put under even greater threat than it is already,” says John Webber, Head of Business Rates at Colliers.
Currently the business rates multiplier (used to calculate rates bills) is at a high 51.2p for every £1 of a commercial property’s rateable value, and 49.9p for small businesses. Given business rates bills rise in line with inflation, based on the CPI figure for the previous September, this year’s September CPI figure of 6.7%, means rate bills are likely to soar next April unless action is taken. Colliers estimate this will put an extra £1.74 billion on the rates bill across the board, with the retail sector alone seeing an increase of around £480 million in April. The sector will be hit even harder as business rates reliefs are expected to come to an end at the same time unless a further extension is announced.
A similar dire effect will be seen in the hospitality sector, where UK Hospitality calculates the sector will see a £234 million rates rise in April if no action is taken.
Last year the Chancellor froze the multiplier across the board to help businesses facing bill rises, but in the run up to this year’s Autumn Statement, the Chancellor has hinted only about supporting smaller businesses, saying nothing about supporting the bigger retailers or hospitality chains. This has led to industry fears that whilst the Chancellor might freeze the smaller business rates multiplier, the multiplier for larger businesses will be allowed to rise with inflation.
“This will be a massive hit to the high street, “says John Webber. “Although most businesses in the retail and hospitality sectors have benefited to some extent from the 2023 Revaluation, the sectors are still under pressure facing higher occupational costs across the board as energy, employment and insurance costs soar. The larger retailer and hospitality companies are the main employers in their sectors. Hitting them with a 6.7% rise in their rates bills next April will have a dire impact and certainly dampen expansion and growth plans and for some businesses might be the last straw. The situation is even more bizarre when we see the current inflation figure has already fallen to 4.6% and may be around 3% next April, but we would see such businesses tied to the 6.7% figure for the year.”
As way of illustration, Colliers has looked at M&S’s rates liability (bills) which it estimates will rise by over £10 million next year because of 6.7% multiplier increase and the reductions in transitional relief from 23/24. As an example, Marble Arch M&S will see an increase in its rates bill from £2.66 million this year to £2.83 million next year. Further along Oxford Street, Selfridges’ rates bill will increase by over £0.55 million to an eye watering £9.503 million per annum. The increases are not confined to Central London: Primark in High Street Birmingham will see its rates bill increase from £681,000 to £725,000 next year.
“If the Chancellor does not support those retailers and hospitality companies with multiple stores or outlets, we will continue to see the trail of bankruptcies we have seen from such chains in recent years from Toys r Us and Laura Ashley and Carluccio to most recently TM Lewin and Wilko.”
According to Colliers the retail and hospitality sectors are not the only sector that will see their rates bills rise. Colliers estimate the logistics/manufacturing sector will see rise of over half a billion pounds in April and the offices sector is expected to face an extra £401 million in its total rates bill. Such rises will deter expansion and investment by these businesses.
Webber continues, “Freezing the multiplier for 2024/5 is of course only the first step. Ultimately, we need the government to fulfil its election manifesto and introduce proper business rates reform, primarily by the government rebasing the multiplier to a level that businesses can afford- say 34p in the £ and reforming the sticking plaster relief system- so that every business contributes something for their local amenities.
Instead, a tired Government and work from home “group think” civil servants have led to the burden of business rates continuing to climb – this Government is now in the last chance saloon to do something positive– let’s hope it does the right thing, after even if it is 13 years too late!
“Although we’d love the government to commit to widespread reform, we are not hopeful, given its current track record. However, what it really must not do is make life even tougher for businesses by ignoring pleas to freeze the multiplier across the board for all sizes of business. Failure to do this would make all claims to “Save the high street” totally meaningless and hollow.”