The Welsh Government’s decision to defer the Business Rate Revaluation until 2017 is a disaster, according to Huw Thomas, Director in charge of Retail at Cooke & Arkwright. “Letting shops in today’s climate on many of our high streets is a significant challenge,” he said. “The high street is under huge stress, but this is potentially a deal breaker for new lettings and lease expiries.”
High street business rates are not the only factor; the extent of out of town developments, car parking difficulties and the rise in internet shopping are all having a huge impact, but the decision to defer the revaluation means that hard hit businesses will suffer even further. Andrew West, Director in charge of Rating said, “The most beleaguered businesses will continue to suffer an unfair, excessive tax base while those that have been most resilient during the recession bear a disproportionately low level of business rates.”
Cooke & Arkwright research shows that a typical shop in prime Commercial Street in Newport has a rate liability of £80,500 in 2013. If the revaluation had gone ahead this would have fallen to around £45,000. In one particular example, the former tenant chose to vacate on lease expiry and the property is now occupied by a charity shop.
Mr Thomas said, “Retailers margins are so narrow, why would retailers choose to renew on lease expiry if business rates continue to be so high? Historically the relationship between annual rates liability to rent would have been 35-40%, now business rates are either equal to, or in some extreme cases, exceed current rents. If the revaluation had gone ahead, this disparity would have been corrected with rates falling a long way below rents.”
Retailers in towns like Newport could have seen a drop in their rate bills by 30-40% if the revaluation had taken place, according to Mr West. “As it is, desperate landlords are making ill informed, short term decisions driven by the need to avoid empty property rates.”
Mr Thomas pointed out that all the Arcadia shops – Dorothy Perkins, Wallis, Topshop and Burtons – chose to leave Newport city centre when their leases expired and relocated to Newport Retail Park, while Next has also relocated and Marks & Spencer recently closed its city centre store.
The Welsh Government’s process of regular consultation on the subject of business rates was to be commended. Mr West had provided Professor Brian Morgan’s Business Rates Review Task and Finish Group evidence on behalf of RICS. “However, it is frustrating when constructive evidence appears to have been overridden in order to maintain continuity with England,” he said. “The deferral decision is disappointing as Mr Morgan’s original report in 2012 recognised the importance of five yearly revaluations in fairly redistributing the rate burden.
“The deferment does not address any of the concerns of the property industry but rather, exacerbates the situation and will infuriate large sections of the business community.”