Fifteen major retailers or restaurant groups have gone into CVA or administration in the twelve months since the April 2017 Business Rates Revaluation, according to Colliers International, the global commercial real estate agency and consultancy, with ten of them since the beginning of this year- in the last three and a half months alone. And, according to John Webber Head of Business Rates, there seems to be little reprieve on the horizon going forward. “These figures are as bad, if not worse than the crash of 2008/9 when 16 companies went into administration- 12 in 2008 and 4 in 2009- and we are only in April now.”
Colliers has calculated that already around 12,000 jobs have been lost or are on the line. “We wonder how many more retailers are going to get into trouble or people lose their jobs before someone decides to tackle the problem properly.”
Colliers has calculated the rating bills of each of the household names* that have gone into administration or announced CVAs since the 2017 Revaluation and the types of bills they are either facing or would be facing in 2018/9 if still trading. The figures show that together they saw a rates bill of over £152 million last year and would be hit with an even higher bill this year, with the bills starting to hit the mat now. Some of this the Chancellor will now be missing from his rates tax take this year. The table below includes Conviviality’s Bargain Booze and Wine Rack stores, which were part of its retail chain which was bought in a pre-pack administration and Carpetright, which on Thursday announced it was closing 92 stores and axing 300 jobs.
|Year of Administration/ CVA||Company||No Stores Closed/Looking to Close||Est Rates Bill (m) 2017/8||Est Rates Bill (m) 2018/9|
|2017||Feather & Black||20||£0.55||£0.58|
|2017||Handmade Burger Co||9||£1.3||£1.4|
|2018||Toys R Us||105||£21.9||£21.9|
|2018||Bargain Booze + Wine Rack||+||£3.26||£3.42|
|TOTAL TO DATE||£152m||£154m|
+Not yet announced how many stores will be closed/jobs lost
This worrying picture is why Webber and many other rating experts feel the Chancellor missed a trick in his Spring Budget by failing to tackle the issue of business rate reform, leaving many businesses and retailers out to dry, particularly as the new 2018/9 rate bills for April 1st start to hit home.
As Webber sums up, “Toys R Us was struggling with a rates bill of £22m a year and it finally went down because it could not pay a £15m VAT bill. ”
Webber points out that business rates cost is obviously not the only reason retailers, pubs and now casual dining restaurants are struggling. Higher costs in terms of wages caused by the NMLW and apprenticeship levy, together with increased costs of materials due to inflation have combined at a time when due to economic uncertainty less people are going out and buying in shops or eating in restaurants. Some retailers have structural issues with high amounts of private equity demanding unattainable returns and all are suffering from the onslaught of on-line shopping making the investment and cost of running bricks and mortar premises costly.
However, the fact that many retailers and restaurants have been suffering from their higher rates bills following the 2017 Revaluation, and others who should have been seeing a reprieve in their bills have not yet received this, has made the situation worse. “Some businesses, particularly those in London saw massive rises in their rates liabilities in 2017, some of which they needed to pay last year, but with the second big uplift coming now in April, in addition to a 3 % inflation rise, they are being knocked for six.”
Similarly, retailers and restaurant operators, in less affluent areas who should have seen relief from the Revaluation are still not benefitting, due to the fact that it takes four years of “transition” before they are allowed to pay their bills at the new revalued level.” By delaying business rates reaching their true levels, retailers and restaurant operators and pubs in such areas have been forced to pay for the better ones for too long and there is only so long that they can pay at inflated levels.”
According to the Chief Executive of UK Hospitality, pubs and restaurants alone are therefore paying £1 billion a year more in rates than they should be.
Trade bodies such as UK Hospitality, Camra and the British Beer and Pub Association have also been vociferous in asking the Chancellor to reform the business rates urging him to reduce, “the unnecessary costs of doing business” to avoid further closures and job losses from a sector “at tipping point”.
Webber himself calls for a proper business rates review as seen in Scotland undertaken by Ken Barclay last year, looking at the multiplier and the whole system of reliefs and who funds the system.
Webber continued, “It is naïve to think the Government can afford to reduce the £25 billion pot it receives from the business rates levy, but it is in everyone’s interests that we properly reform the system so that every business pays something for the services it receives from the local community and the rates burden is not purely on a few that increasingly can’t afford it. And it also is essential that businesses have a true and fit for purpose appeal system, if they believe they have been assessed unfairly. “
“The fact that ten sizeable retailers or restaurant groups have gone into administration or CVA since the beginning of the year is extremely worrying. Our figures do not even include all the small independent stores that have gone to the wall too. With big bills landing in April the situation is only going to get worse. Reforming the business rates system won’t solve all the retailers’ and restauranteurs’ problems, but at least it would be a start to show support – not another kick in the teeth for struggling businesses.”
*mostly, those with 20 stores or above