Retailers in England are preparing for a possible surge in business rates next year, with experts warning that rates could increase by up to £3 billion in April 2023. Over the next five years, the total hike for commercial premises is expected to reach £25 billion. This projection is based on the assumption that the government will resume inflation-linked rate increases after the end of the pandemic support package, which suspended such rises between April 2020 and March 2023.
According to real estate adviser Altus Group, if rates were based on September’s consumer price inflation of 10.1%, they would rise by over £2.7 billion in England for the 2023-24 period. This cumulative effect would result in an additional £24.63 billion over the next five years, even if inflation falls back to its target of 2% by 2025.
The lack of confirmation from the government regarding the post-pandemic period has raised concerns about the added pressure that increased rates could place on struggling businesses. Calls have been made for a fairer approach to setting business rates, one that focuses on stimulating growth rather than relying on inflation. Altus Group UK President Robert Hayton criticized the government for not prioritizing growth to boost local tax revenues instead of using inflation to expand the tax base.
Experts like Josh Myerson from Montagu Evans and John Webber from Colliers have echoed these sentiments, urging the government to reconsider its automatic inflation-linked revenue approach. They argue that there is no need to constantly increase rates revenue in line with inflation.
In the coming weeks, the government is expected to release a draft list of new property revaluations used to calculate business rates. While this may lead to reduced liabilities for some retail properties, there is uncertainty about whether these reductions will be phased in over several years. The publication of the rating list and clarification on any adjustments due to inflation for the following year are crucial for businesses to effectively plan their finances.
It should be noted that the revaluation of properties will take effect in April 2023, based on market rents estimated as of April 2021. However, Altus Group emphasized that this revaluation would be revenue neutral and not generate additional funds for the Treasury. Nevertheless, it would still contribute to an increase in overall business rates revenue for the 2023-24 period in line with September’s consumer price inflation measure.
The potential rise in business rates adds another challenge for retailers already facing the impact of the pandemic and rising costs. Finding a fair and sustainable solution to business rates is vital for the long-term success of the retail industry and the overall health of the economy.
Links:
– Retail Gazette – Retailers brace for potential £3bn increase in business rates in 2023
– BBC News – Retailers fear £25bn rise in business rates over five years
