The chancellor’s decision to couple business rates revaluation with a £13.6bn package of support has been warmly welcomed by the industry.
But even that amounts to little more than “tinkering around the edges”, as fundamental reform of the system is still urgently needed.
After years of complaints that the government was ignoring the elephant in the room, Jeremy Hunt took notice of it in the Autumn Statement yesterday.
“This is the most significant rating moment I can recall in my career,” said Scott Murdoch, CBRE Advisory Services’ UK retail chair.
John Webber (pictured), Colliers’ head of business rates, said: “I take my hat off to the government. This is a major boost to the high street and to businesses in general and a fair appreciation of the economic situation. It shows that our campaign on behalf of business has been worth it. “
However, Landsec chief executive Mark Allan wasn’t as easily won over. “I was disappointed there wasn’t a material update on the fundamental reform of business rates,” he said. “While the updates on downward transitional relief and freezing the multiplier are welcome, these are tinkering around the edges of a system that needs fundamental reform.”
While details of the revaluation won’t be released until Monday, supporting documents to the Autumn Statement did spell out the support package.
- Business rates multipliers will be frozen in 2023-24 at 51.2p – or 49.9p for small businesses. According to the government, this is a tax cut worth £9.3bn over the next five years and will mean bills are 6% lower than without the freeze.
- In addition to that is the £1.6bn of exchequer-funded support offered by the upward transitional relief caps – at 5%, 15% and 30% depending on the size of the business, which will help ratepayers facing hefty bill increases following the revaluation.
- And, vitally, there will be no downward transition for businesses whose rateable values have fallen following the revaluation. Instead, ratepayers bills will fall immediately. According to Colliers, which has been among those tirelessly campaigning against downward transition, this will prevent an extra £2.7bn more in costs.
- Then there is the relief for the retail, hospitality and leisure sectors, which will be extended and increased in 2023-24, from 50% to 75% up to £110,000 per business. That package is worth £2.1bn.
- On top of this there will be additional support for small businesses worth more than £500m over the next three years.
Ryan Jones, head of business rates for Cluttons’ northern region, said: “This is great news for retailers who were expecting the worst.”
However, Chris Grose, rating director of Hartnell Taylor Cook, said while the removal of downward transition “cannot be scoffed at”, the multiplier “sadly remains exceptionally high and no steps have been taken to reduce it”.
He said: “If the government wants to effectively support all businesses through the recession, more will still be done to reduce the burden of business rates.”
Melanie Leech, chief executive of the British Property Federation, said: “Businesses across the UK are facing unprecedented cost pressures and we are pleased the chancellor has listened to the BPF, frozen the business rates multiplier and introduced further reliefs, to help prevent a tide of insolvencies on the high street. Many high street businesses have been paying artificially high rates bills for years and the chancellor has recognised this is simply not sustainable.”
Colliers’ Webber added: “It is with massive relief that the government has finally listened to us and other industry bodies about out-of-control business rates rises following the next revaluation. Business rates cannot be revenue-neutral without causing significant hardship. Businesses now will be able to sensibly plan ahead for 2023.”
Many others were effusive in their support.
“The chancellor has thrown the high street a lifeline,” said Tim Attridge, head of UK ratings at CBRE Advisory Services, who said he was especially pleased with the confirmation that inflation will not impact the multiplier used to calculate the tax. “Quite possibly the best news for retail and indeed all struggling businesses for some considerable time.”
Vivienne King, chair of the Shopkeepers Campaign, said the government was to be “congratulated on having listened to industry”.
Others were more restrained, with Montagu Evans rating partner Josh Myerson calling it “a skilled balancing act”.
But JLL’s head of rating, Tim Beattie, was far from impressed. ”All is not what it seems,” he cautioned. He pointed out that implementing the full CPI uplift to the 2023/24 business rate multiplier would have seen the multiplier increase from 51.2p to 54.2p, while a “true freeze” would have actually seen the multiplier fall from 51.2p to 49.3p.
“The chancellor has taken advantage of the increase in values resulting from the revaluation to deploy smoke and mirrors tactics and conceal an increase of 4% in the amount of rates collected in 2023/24.”
Colliers’ Webber agreed with Landsec’s Allan that this must only be the start. “The government still needs to stick to its manifesto commitment of reducing the overall burden of business rates. But this is a step in the right direction and is hopefully a new chapter in the relationship between government and business.”
And Cluttons’ Jones agreed. “Our long-term call remains for a more structural reform to business rates to make it a fairer system and, with this in mind, the online sales tax not going ahead is disappointing but expected due to the complexities it presented in its proposed guise.”
Paul Nash, regional head of business rates at LSH, issued a similar note of caution, calling the measures “a step closer to a fairer – if still, imperfect – system.”
Robert Hayton, UK president of Altus Group, said the chancellor had “listened, delivered and provided certainty to business” with the rates decision. “The next part of the puzzle could come as early next week with the publication of new draft rateable values and then businesses will know exactly their rates bills for next year.”
For that, we will have to wait until Monday. “All we can hope for now is the Valuation Office Agency has correctly assessed the values,” said Webber. “We will know next week.”
To send feedback, e-mail piers.wehner@eg.co.uk or tweet @PiersWehner or @EGPropertyNews
